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Markets & Economic Update for May 2023: Inflation Persists Amid Cooling Economy

May 5, 2023
David Lundgren, CFA®
David Lundgren, CFA®

Each month, senior leaders of Hancock Whitney's Asset Management team discuss the latest news and events that impact markets and the economy.

 

This month:

First quarter GDP disappointed versus expectations, and chances of recession for second half of the year have ticked up.

 

Watch and listen to the webinar:

 

Key Takeaways:

  • The Federal Reserve’s hike of 25 basis points at the May 2-3 meeting likely leads to the Fed pausing. Inflation data trends, while mostly favorable, remain stubbornly above the Fed’s inflation target. The market anticipates the Fed will begin cutting rates this year in the face of a weakening economy and banking stress, but Fed Chairman Jay Powell continues to strongly suggest that a cut in the near term is unlikely. A strong labor market continues, which reduces the likelihood of a cut in the near term.

  • Earnings reports for the 1st quarter, while declining, have come in stronger than expectations. Markets have reacted positively as many equity indices produced modestly positive results for April. However, the headline S&P 500 number doesn’t tell the whole story as the market remains bifurcated with the average stock not keeping pace with capitalization weighted market indices. We still remain cautious on the outlook for stocks given the slowing economy, stubborn inflation, and many geopolitical issues for markets to navigate.

  • Fixed income yields changed very little in April providing modest returns for the month. Bond yields seem to have settled into a comfortable trading range as clarity on Fed policy going forward remains uncertain.

  • While banking related issues once again are making headlines, deposit flows and banking liquidity have mostly stabilized.

  • The debt ceiling deadline approaches and the threat of a government shutdown or even a government default looms. Both sides appear to have reached a point to begin negotiating and we remain fairly positive a resolution will be reached in the upcoming weeks.

  • Tension remains high between the U.S. and China. The developed world has spent decades building trading relationships with China. Now, numerous areas of conflict have arisen threatening global economic growth as these relationships continue to deteriorate.  

 

The Hancock Whitney Asset Management team is ready to help guide your portfolio through market uncertainty to help you achieve your investment goals. 

 

Talk to a Private Banker

 

 

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