June 1, 2024

The US economy is set to slow, although a recession this year is unlikely. Even though the Federal Reserve is not ready to cut interest rates just yet, the valuations in the markets suggest a soft landing is already priced into the economy. As always, a disciplined focus on quality and periodic rebalancing are the keys to a sustainable portfolio that can weather any unforeseen shocks to the markets.

Consumers drive 2/3rds of the economic activity and continue to show participation albeit at a slower rate than originally reported by the Bureau of Economic Analysis whose first estimate was that first quarter GDP grew at a 1.6% rate now revised to 1.3%. Personal consumption in the first quarter grew 2%, down from a prior reading of 2.5%. The reading came in significantly lower than fourth quarter GDP, which was revised up to 3.4%.

The slowdown in headline GDP comes at a time when markets have been sensitive to any readings indicating that the economy may be running too hot for the Federal Reserve's liking, as inflation has proved stickier than expected. The concern is red-hot growth would boost price increases.

So far, monthly data beyond March generally points to a continued, but gently cooling, economic expansion and we expect continued GDP gains this year and barring a black swan event, a healthy advance in 2024 overall.

The yield on the 10-year Treasury note has gone down to 4.55%, and the yield on the two-year Treasury yield decreased to 4.92%. May saw the major indices close higher with the Dow, S&P 500, and NASDAQ at 2.64%, 10.64%, and 11.48%, respectively.

*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.  All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.