The NASDAQ dropped -9.81% in May, the DOW dropped -5.50% and the S&P 500 eked out a
marginal gain rising 0.01%. However, that small one-month advance belies just how volatile
trading was in May.
The broader market index experienced 10 daily moves of at least 1% in the 21 trading days last
month. That included a 4% drop on May 18 — its biggest one-day drop since June 6, 2020 —
and a 3% rally on May 4, the benchmark’s strongest daily gain since May 2020.
The S&P 500 also dipped into bear market territory, briefly trading more than 20% below a
record high set in January. Then it set off on a blistering rally last week to claw back from those
This market volatility isn’t expected to subside anytime soon, as the Federal Reserve is
expected to continue to raise rates, inflation is still near multi-decade highs, and the Ukraine-
Russia war rages on.
Understanding that inflation is a regressive tax, which means it is disproportionally difficult on
lower-income families, we note that borrowing is increasing, credit card use is increasing.
During the month indications from retailers point to a consumer driven downturn. Certain
companies reported earnings downturn and indicated a change in consumer habits. Those
company’s stock; Walmart & Target got clobbered.
The good news is that corporate revenue, EBITDA, and balance sheets are as good as they have
ever been which will help sustain companies through a slowdown. We note that during the
earnings season, forward looking statements indicate that growth is slowing but not indicating
there is no growth.
That said a recession is not inevitable but highly probable. Across 5 recessions since 1981, the
average experience saw Energy, Consumer Staples, Health Care, and Utilities outperform the
S&P 500 index.
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