Monthly Economic Update May 2016


Monthly Summary
In relation to dramatic moves earlier in the year, investment markets were generally tame in May. Domestic stocks rose by low single digits and bonds were basically flat. International markets were off modestly, largely due to strength in the dollar.

As typical, investors were hypersensitive to Federal Reserve communications during the month. The most important of these was the mid-May release of the Fed’s April meeting minutes. The somewhat hawkish stance of said release resulted in an upwardly revised probability of a Fed interest rate hike on June 15 – from essentially zero to just over 30%. And odds for a hike by the July meeting now exceed 50%. In response, the dollar strengthened, commodities and international investments were challenged, and an already flat yield curve flattened further. Aside from Britain’s potentially disruptive June 23 vote on membership in the European Union, which could give the Fed pause, many signs do suggest a tighter U.S. monetary stance is in order. Housing and auto sales remain strong, wages are on the rise, industrial production and durable goods orders have improved, and consumers recently dialed back savings in favor of consumption. Inflation is also on the rise. April posted the strongest month on month gain in inflation in over three years as the disinflationary pulses of a strong dollar and weaker energy prices have begun to fade. Moreover, lethargic U.S. worker productivity against a backdrop of a tightening labor market could lead to greater inflationary pressures than markets presently expect. June, July, or September, it does appear reasonable to expect a Fed rate hike in coming months.

Economic Data

May data

May data 2

Market Returns

Mrkt Returns 2

Disclaimers
This commentary was written by Robert W. Lamberti, CFA, VP and Co-Chief Investment Officer of Summit Equities, Inc. and Summit Financial Resources, Inc. Source of performance: Morningstar®. Indices are unmanaged and cannot be invested into directly. The investment and market data contained in this newsletter is not an offer to sell or purchase any security or commodity. Standard & Poor’s 500 Index (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The MSCI EAFE and Emerging Markets Indexes were created by Morgan Stanley Capital International (MSCI) and designed to measure equity market performance in global developed and emerging markets, respectively. The Barclays Aggregate Bond Index is a market capitalization-weighted index comprised of government securities, mortgage-backed securities, asset-backed securities, corporate securities, and a small number of foreign bonds traded in the U.S. It is used to represent the universe of bonds in the domestic market. REITs, Real Estate Investment Trusts, are securities that invest in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, however, may have liquidity constraints. Past performance does not guarantee future results. Information throughout this Newsletter, whether stock quotes, charts, articles, or any other statement or statements regarding markets or other financial information, are obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the reader. To unsubscribe from this investment newsletter please reply to this email with “unsubscribe” in the subject. Opinions expressed are subject to change without notice and are not intended as investment advice or a guarantee of future performance. Consult your financial professional before making any investment decision. Securities and Investment Advisory Services offered through Summit Equities, Inc. Member FINRA/SIPC, and Financial Planning Services offered through Summit Equities, Inc.’s affiliate Summit Financial Resources, Inc. 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600, Fax: 973-285-3666.

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