After a five week win streak, the S&P 500 logged its first weekly decline marking an end to an eventful May. On Friday, the Federal Reserve’s preferred inflation gauge, the core PCE Price Index, met consensus for April despite a bigger than anticipated easing in consumer spending growth. A renewed bout of volatility gripped US stocks in the final stretch of May, with the market finishing higher amid a rotation between technology and other industries. After dropping almost 1% amid weakness in tech megacaps, the S&P 500 rose about as much to notch its biggest monthly advance since February.

It is now nearly certain that the European Central Bank will lower interest rates before the Federal Reserve, bucking the trend of the U.S. central bank leading the way in terms of monetary policy. ECB officials have pretty much confirmed that the first cut will happen at its meeting next week, as inflation has moved closer to its 2% target. This contrasts with Fed officials’ lack of confidence in easing any time soon.

Does Wall Street care anymore?

Future Wealth’s View

The Federal Reserve, which holds its next Federal Open Market Committee meeting on June 12, 2024, is not expected to reduce its policy rate of interest any time soon. Wall Street may move higher despite the Fed’s insistence on staying put. But, cracks are beginning to develop and soon Wall Street could get nervous about the Fed delaying interest rate cuts. 

Here are some concerning reports – Salesforce saw a significant slowdown in its business as enterprise spending as cloud software expenditures appears to be shifting toward Artificial Intelligence investments. Dell said its profit margin is getting smaller. Okta highlighted macroeconomic challenges. Veeva’s CEO said on his company’s earnings call that generative artificial intelligence has been “a competing priority” for customers. Software makers MongoDB, SentinelOne, UiPath and Veeva all pulled down their full year revenue forecasts this week. Many other enterprise technology companies offered similarly troubling commentary. We believe it is important for investors to pay attention to these developments but not necessarily act on it without appropriate research to determine whether these are company specific or an indication of macro slowdown.

On another note, the 34 felony counts of which Donald Trump was convicted Thursday presents a new, grim chapter in the 248 year history of America. Years from now, our grandchildren will open their history books and wonder how we elected this crook to be President.

We have no one else but ourselves to blame.