Week Ending May 27 Financial Markets Update

After the longest series of weekly drops during the past decade, the S&P 500 rose over 6% last week and 9% from the low last Friday. The index posted its best weekly return since 2020. Almost all other assets rose along with stocks, with only the dollar and cryptocurrencies lagging during the week. Volatility has been rampant during the year as investors cling to every economic release hoping to balance the observed inflation and growth indicators with potential interest rate moves by the Fed. Last week, The Federal Reserve; Bank of Atlanta President Raphael Bostic said policymakers could pause rate hikes in September if two half-point moves were made during the next two meetings. Chairman Jerome Powell added that the two moves in June and July could leave more room for rate increases if inflation data continues to show elevated levels.

Bond yields fell across most of the curve for the third straight week marking their lowest levels in over a month. Yields tumbled on Tuesday as investors renewed demand for safe-haven treasuries after negative earnings news created caution around advertising and consumer spending. New home sales also disappointed on Tuesday after reporting a 0.591 million annual rate, well below the consensus expected 0.749 million and marking a 27% drop from a year ago. The spike in the average mortgage rate to 5.24% paired with higher-priced homes and broad-based inflation has cut demand. The release of Fed minutes on Wednesday left yields little changed. Most US policymakers view half-point rate hikes as appropriate at the next two meetings but left the door open for a pause in early fall. Officials believe expedited tightening in the coming months would leave the Fed “well-positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustment.”

The interpretations and organizations of these ideas are the confidential thoughts of 1st & Main Investment Advisors and do not represent the opinions of BFCFSDifferent types of investments involve varying degrees of risk including market fluctuation and possible loss of principal value. There can be no assurance that any specific investment strategy will be profitable. *some content provided by First Trust Portfolios L.P. Member SIPC and FINR

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