May 2023 Monthly Commentary
Greetings Team!
Even if we avoid Doomsday from the debt ceiling fiasco, we face the more mundane risk of a very narrow stock market with capital flowing to just a handful of companies. Index investors might not like the markets next phase! This past month delivered the resurgence of taking space rides, having air JOBY replace our Lyft drivers, but perhaps most important the Stevenbot(s) marching forward with the steepening artificial intelligence curve.
A new era is just beginning… there will be a lot of hype and significant opportunities as well as risks. We will be there to help you cut through the noise and take advantage of the tremendous potential of this evolving area.
May delivered renewed excitement across most markets. However, in the end, major market indices didn’t make much progress with the Dow Jones ending the month deep in the red by -3.48%, Nasdaq plowing higher +5.80%, S&P 500 flat +0.34%, Gold slightly lower -1.33% and oil plummeting -10.22%.
Investors, myself included, seem to be losing confidence in the Federal Reserve! Market projections of future interest rates have consistently differed from the Fed’s, a reflection of the lack of confidence, and markets are usually right- not the Fed. Profits are being prioritized while losses are socialized.
It’s so telling and revealing of what happens behind the scenes at central banks and how the world got into this inflation mess in the first place. “Have Fun Staying Poor”, straight from the Bank of England’s chief economist was one of the most shocking public opinions I have ever heard.
With inflation still growing at 10% annually, by official numbers in the United Kingdom, here’s what England’s central bank really thinks about what the public should do about it. “British households and businesses need to accept they are poorer and stop seeking pay increases and pushing prices higher”, the Bank of England’s chief economist, Huw Pill, has said. You can’t make this stuff up because it’s the truth. Perhaps it’s the very reason I chose to read Federal Reserve chairman, Jerome Powell’s commentary this go around versus listen… to avoid vomiting. Conceptual economists living in a land of data and digital money-printers love to engineer real-time experiments on the real-world economy, then take no responsibility when things don’t go as they planned.
Equities continue to trade in similar fashion as they have for a while now. For example, the S&P 50 has been in a tight trading range for nearly two months now. Beneath the surface, a handful of mainly technology companies are keeping the index afloat, while the majority of companies under the hood are negative year-to-date. The index returns are extremely misleading, and the lack of leadership is very concerning- indicative of a near-term top potentially across the broader markets. I reiterate, or dare I say haunts, me of the pattern we experienced during the technology boom in the 1990s. That didn’t end well!
A banking crisis historically cannot be solved in a week, or a month. The Deposit Drain might have settled with clear winners and losers emerging, but a large volume of commercial real estate loans are coming due in the next few years and it will be challenging to refinance. This could be the next chapter of the evolving banking crisis. Hopefully, this respite provided ample time and capital market liquidity to shore up institutions in potential peril.
A potential Fed pause, debt ceiling drama abating, and Ukraine progress could lead us to higher highs across some markets by year-end. Patience and prudent investment strategy could certainly pay off. The painfully, frustratingly long cycle continues with us remaining in two steps forward, one step back environment. But, as our clients are witnessing, the steps forward are increasing despite lack of overall market advancement. I believe this will continue to accelerate, positioning us very strong as the year presses on.
Stay the course with us, as difficult environments such as we have experienced the past few years have historically been followed by periods of exceptional returns. We are coming off a busy month for those not plugged into The Schmitt Group (TSG) @ Raymond James social media. Ray Jay Cares month included our group and branch volunteer evening for God’s Love We Deliver (GLWD) where we prepped meals for delivery in the New York City metro area and in addition the New Jersey Food Bank.
Cassandra Biehl, our group practice manager continued her tremendous work with Read Ahead – mentoring NYC school children grades 1-5 to build literacy skills and confidence. We celebrated Raymond James 60th birthday – Happy Birthday Raymond James! As we enter June- celebrating Pride month, we have many events slated to support across the country ending the month with our team in St. Petersburg, FL for Raymond James Pride Symposium.
Have a Great June & Happy Pride! Onward & upward always!
Steven W. Schmitt, MBA, CFP®, CPM®, CRPS®, ADPA®
Managing Director
The Schmitt Group of Raymond James
