Last Week In Review
Markets rallied for most of last week, pushing the S&P 500 and the Dow to new record closes. For the week, the S&P 500 rose 1.21%, the Dow gained 0.67%, and the Nasdaq grew 1.36%.1 Despite some volatile weeks, markets ended May on an upbeat note. For the month, the S&P 500 picked up 2.10%, the Dow gained 0.82%, and the Nasdaq rose 3.10%.2
On the economic front, investors got their second look at first quarter Gross Domestic Product (GDP) growth last week and the revised estimate shows that the economy contracted by 1.0% in the first three months.3 Markets shrugged off the disappointing news, partly because much of the GDP drop can be attributed to weather. Despite the dip in Q1 GDP growth, Philly Fed President Charles Plosser is still optimistic about a stronger second quarter and projects that annual GDP may still reach 3.0%.4
Consumers And The Labor Market
A gauge of consumer sentiment fell in May as Americans worried about stagnant wage growth. While most respondents were confident that the economy is on an upward trend, many were concerned about how poor income growth will affect their standard of living this year. Jobless claims fell sharply last week. The four-week moving average of claims also fell to a new post-recession low, indicating that the labor market continues to recover.
Last week we covered “sell in May and go away.” The theory is that stock investors should sell out of their positions in May and buy again in November because they should avoid holding equities over the summer. The strong performance markets experienced last month is a perfect example of why you should ignore these types of formulas. Complex market behavior is impossible to predict with any accuracy, and long-term investors need to focus more on long-term financial goals than on short-term market performance.
The week ahead is heavy with economic data, including the much-anticipated May jobs report, which investors will look to in order to confirm the upward trend in the labor market.
7 http://bloom.bg/1opnRqY, http://bit.ly/1iJKHrl
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