- Inflation moderated slightly, with the annual rate dropping to 8.3%.
- Labor markets remained steady, with the unemployment rate remaining at 3.6%.
- GDP contracted by 1.5% in the first quarter.
- Further economic decline possible given the Fed’s determination to fight inflation. However, the balance in priority between the economy and inflation is uncertain.
Select economic and market data
Statistic (monthly unless noted)
|U.S. GDP (quarterly)||-1.5%||6.9%|
|Consumer Price Index Y/Y||8.3%||8.5%|
|2-Year Treasury Yield||2.56%||2.71%|
|10-Year Treasury Yield||2.84%||2.93%|
- Equity markets paused from recent declines, posting relatively flat returns on average; however, YTD returns remain negative.
- The long-time market-leading NASDAQ trailed again in May, adding to its YTD leading decline of -22.5%.
- Foreign markets, both developed and emerging, led returns on indices shown.
- Responding to Fed hikes, shorter rates rose while longer rates generally declined slightly (expecting inflation is a short-term problem).
- Subsequently, most fixed income indices saw positive returns for May.
- YTD fixed income returns remain largely negative for all but the shortest maturities.
- Neutrally positioned on equities while slightly favoring international over domestic for long-term returns.
- Maintaining shorter-duration fixed income structure as the rising interest rate environment is likely to persist.
- Finding value in select domestic equities while trimming outsized “growth” exposure.
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