NEI Monthly Market Insights: May 2023

Jun 26, 2023

Markets remain in holding period through May

The S&P500 rose 0.4% in May and remained in a holding pattern throughout month as investors waited for clarity on the U.S. government’s ability to secure a deal to raise the debt ceiling limit. The trading range of the S&P 500 is continuing to narrow but the market remained range bound and unable to break through the upper limit of 4200, as it closed the month at 4180.The U.S. labour market remains tight as the unemployment rate fell to 3.4% from 3.5% in March. Inflation also remains sticky as core CPI rose 0.4% month-on-month in April. The Federal Reserve continued tightening and raised rates for the tenth time by another 25bps, bringing the benchmark rate to 5 to 5.25%. As a result, the 2-year and 10-year yields both went up to 3.63% and 4.40% respectively.

The NEI perspective

Mega caps continue to drive markets as the familiar companies (Microsoft, Apple, Google, Meta, Amazon and Nvidia) continue to lead the market and are responsible for most of the year-to-date gains for the market. Nvidia’s strong rally through the month pushing its market capitalization to $1 trillion on May 30th, making it the fifth company to reach a $1 trillion valuation.

U.S. avoids catastrophic debt default as the government was able to agree on a bipartisan deal to raise the $31.4 trillion U.S. debt ceiling prior to the June 5th deadline set by the Treasury that would have resulted in suspending payments.

Semiconductors soar on AI promises as adoption of AI platforms like the well-known service Chat GPT continues to gain adoption at a recording setting pace. While it took Netflix nearly 10 years to reach 100 million subscribers and Instagram just over 3 years, Chat GPT reached the100 million user mark only 2 months after its release.

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