May 2024 Market Commentary

The month of May marked a reversal of the temporary selloff that occurred in April as the positive momentum in equities resumed course. The S&P 500 gained an additional 241.82 points to close the month at 5,277.51 and the TSX increased 554.58 points to finish at 22,269.12. Wall Street’s three major indexes returned to record highs during the month with technology stocks taking the lead. The S&P 500 advanced 5% in May, and the Nasdaq rallied approximately 8.5% while crossing the 17,000 threshold for the first time.

 

With better-than-expected market resilience it is clear we underestimated the strength of the market momentum when we commented earlier this year that we believed performance of the S&P 500 was a little ahead of itself. The same could be said for the TSX and as a result new price target levels for both indices are warranted, revising the S&P 500 from 5,100 to 5,600 and the TSX from 23,000 to 24,500 for the remainder of 2024.

 

U.S. CPI is running at 3.6% year-over-year, which is almost a full point above the measure in Canada. Unemployment nudged a little higher in the U.S. but is still quite low at 3.9% and much better than 6.1% in Canada. U.S. first quarter GDP was revised down to a mild 1.3% pace. Consumer spending started Q2 on soft footing with real outlays dipping 0.1% in April. Home sales have stalled out, and the trade deficit is beginning to widen again. BMO economics has clipped their full-year estimate of U.S. GDP growth by two ticks to 2.2%, which suggests the upside surprises in the U.S. economy for both growth and inflation have drawn to a close, highlighting the increased expectation of a rate cut by the Fed at some point in the second half of 2024.

 

Meanwhile, in Canada a rate cut announcement from the Bank of Canada is anticipated in June (at the time of writing this), although it isn’t a certainty. Better-than-expected inflation results have seen all major measures of core move to a 3% annual pace, and below a 2% trend in the past three months. Canada’s Q1 real GDP came in much lighter than expected at 1.7% growth, leaving GDP up less than 1% in the past year. Yet, the loonie has been steady in the 74 cent range over the past year. The U.S. economy has outpaced Canada’s by more than 2 percentage points in the past year, there remains the possibility that the Canadian index could outperform in the second half if a repricing of interest sensitive stocks takes hold and commodities continue to climb.

 

To receive a full copy of our May 2024 market commentary, please email us msbwealth@nbpcd.com