Goodbye and Thank You, May.
Given that May is historically a notoriously bad month in the market, we were happy to see the Standard & Poor’s 500 (S&P 500) index return up over 2% for the month, even with the 40-minute, 1% sell-off on Friday. In fact, all U.S. equity indices are up solidly year-to-date, all posting a +10% return.
Oh, and if you were reading anything over the weekend about the “Hindenburg Omen,” please file that in the round folder sitting next to your desk on the floor. Better yet, check back in a month and see if anyone is talking about it…I think it’s a bunch of bunk.
Here’s a recap of how the market did last week.
Wow – How About That 10-Year Treasury Bond Yield?
As the U.S. equity indices remain near record highs, the yield on the 10-year Treasury bond rose from 1.66% on May 1 to 2.16% as of May 31.
Please say “WOW” out loud at this point.
That’s a 50 basis point (1 basis point = 0.01%) jump in rates in just one month… in non-sexy finance terms, that’s half of a full percent.
Stronger economic data has historically encouraged selling the 10-year Treasury bond, which is what drives the yield up, but economic data has been coming in weaker over the past month so it’s open for debate if the yields will stick this high or come back down. Further, the yield on the 10-year Treasury has increased by 50 basis points or more over a 30-day rolling period on six other occasions since early 2009. Obviously, those higher rates failed to sustain any upward trend.
We’ll be keeping an eye on this Friday’s labor report. Any strong increase in employment or any upward revisions to the March and April reports will likely increase conversations about the Fed’s bond-buying program slowing down. Conversely, a weak report would probably delay any exit to the bond buying program.
Please call or email with questions.
Investment advice offered through Monument Advisory Group, LLC a Registered Investment Advisor (RIA). Securities offered through LPL Financial. Member FINRA/SIPC. Monument Advisory Group and Monument Wealth Management are separate entities from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values. The 2, 10 and 30 year Treasury is simply the yield at the close of the day.
(1) West Texas Intermediate crude spot price is as of end of week.
(2) London Bullion Market Association; gold fixing pricing at 3 p.m. London time.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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