May was a pretty good month for the U.S. stock market as the S&P 500 and the Russell 2000 both rose. Internationally, foreign stocks were down, while the U.S. dollar strengthened. Bond investors recovered some of their year-to-date losses as rates fell a bit and the Bloomberg Aggregate Bond Index rose.
On balance, the last month featured more noise than signal. Topics of interest were little changed: speculation on tariffs and geopolitical events, prognostications on the direction and magnitude of interest rate changes, and pontifications on the overall direction of the economy. It can be easy to get bogged down in the day-to-day of it all, or to put too much weight on the significance of any particular news item. It’s much more constructive to look at the global landscape. We find it more productive to look at the bigger picture.
First-quarter earnings finished up for most U.S. companies. Overall, the results and guidance were pretty good. CEOs and CFOs were generally upbeat on the economic backdrop. While there are some areas of concern – excesses in some corporate credit, for one – we are inclined to share the constructive outlook. The excesses seem manageable, but the unknown unknowns have the potential to materially change the environment. Based on the current knowns and known unknowns we think it makes sense to stay the course.