Weekly market update 5/31/2024

The S&P 500 broke a five-week winning streak, but May was a strong month as the index rebounded almost 4%.  Roughly half of May’s S&P 500 gains were from just four stocks; Nvidia, Apple, Alphabet and Microsoft, so recent market action has echoed 2023 with unusually narrow market leadership.  Nonetheless, stocks did see strength heading into the weekend, as Friday’s important inflation report, the PCE, came in mostly in line with expectations, and month-over-month core inflation fell to 0.2%, its lowest monthly levels of 2024.  Next week will be a busy week for economic data with important reports around manufacturing, job openings, labor costs, and the May jobs report on Friday.

CONSUMERS ARE PUSHING BACK

On Wednesday, the Federal Reserve released its regional economic survey, the Beige Book, and one of the bigger takeaways was businesses noting increased resistance from customers over affordability.  This echoes recent anecdotes from companies such as McDonalds, Target, and Starbucks, but data from TreeHouse Foods, one of the largest manufacturers of private label products, quantifies how consumers are pushing back.  Lower-cost store brands, or private-label products, have expanded to their largest share of grocery store spend ever (see chart below).  Millennials and Gen Z have been particularly enthusiastic adopting store brands and 68% of high-income shoppers view private label products favorably, higher than both middle- and lower-income consumers (per NielsenIQ).  Inflation remains a headwind for markets, but if consumers are increasingly trading down to cheaper alternatives, it bodes well for the long-term trajectory of prices.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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