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The stock market closed on a sour note in May but managed to hang on to a monthly gain of 1.05% for the month and 2.36% year-to-date. The markets shrugged off a negative GDP revision for the 1st quarter placing Q1 GDP at -.70%. The fixed income market seems to have priced that negative number in already with the 10 year treasury finishing the month at 2.11%.

Volatility has been largely tied to news from Europe with Greece rapidly approaching deadlines for debt repayment in which they have no chance to meet. It appears analysts expect some sort of deal to be reached but until that news breaks the markets will remain volatile.

U.S. consumer spending has been little changed, the latest sign of caution among American households. Exports were influenced by lower growth in energy-related products as well as a general malaise due to a strong dollar, weak world growth, and lack of interest in anything broadly related to the production of commodities.

Most folks expect the housing data to lift off as we move through summer and help the economy improve as measured by the GDP numbers. Over the past few weeks, all of the housing data has shown a housing market that is accelerating across the board. Home price data, pending sales of existing homes, and new home sales all showed surprising strength and generally exceeded analysts’ expectations. However, the market for single-family home sales is still about two thirds below their previous highs. A lot of folks whose articles I have read lately agree that consumer preferences and diminished finances have pushed more consumers into apartments, and it appears that this trend might not reverse itself. That wouldn’t be the greatest news for the economy, since single-family home construction generates more jobs and economic activity than an apartment unit.

Elsewhere in Europe, there are signs that inflation is picking up. European Central Bank (ECB) President, Mario Draghi, flagged up at the ECB Governing Council meeting on April 15th that inflation rates are expected to “increase later in 2015 and to pick up further during 2016 and 2017.” This is good news for equities – suggesting a return of pricing power. It is also positive for economies, because a moderate level of inflation is probably the most palatable way to begin eroding the vast amount of government debt built up globally over the past 25 years or so.

In the fixed income markets, we saw yet another all-time record of debt issuance in May, exceeding $159 billion in corporate debt issuance. It seems that corporate America is beginning to see the end of cheap money and companies are taking advantage of low rates. This is worrisome for the equity markets as this has served as an incentive to buy back shares and engage in M&A activity rather than invest in plant and equipment.

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