The Pulse on the Economy and Capital Markets: May 2024

To Summarize: Companies in the stock and bond markets surpassed analysts’ revenue and earnings expectations. Uncertainty on when the Federal Reserve will cut interest rates grows as recent economic data suggests a weakening economy. Consumer sentiment is declining for lower and middle-income consumers, which is negatively influencing spending habits, especially in the Services sector. We unpack this and more in the May edition of The Pulse.

In the Markets: May has been good to the stock and bond markets despite recent economic data suggesting a more pronounced slowdown than initially anticipated. S&P 500 companies are satisfying investors with results from the first quarter earnings report. Nearly 80% of S&P 500 companies reported better-than-expected earnings and more than 50% reported better-than-expected revenues and margins.   

Will the Fed Cut Rates? Between stickier-than-expected inflation and signals of a weakening economy, expectations that the Federal Reserve will cut interest rates have plummeted. April’s ISM survey data revealed that both the Manufacturing and Services sectors have declined, indicating that the economy may be contracting. 

Consumer Confidence Deteriorating: A consistent theme across the earnings season is the disparity between lower and higher-income consumers. Lower-income consumers have repeatedly noted their stress and are changing their spending behaviors. Most recently, consumer data from the University of Michigan revealed that middle-income consumer sentiment has grown negative when they started the year off positive. Lower confidence and the rise in the price of oil can signal a major headwind for consumers.

Top Headlines: We’re reading about e-commerce spending growing to $331.6 billion, how Chipotle created a culture of throughput, why mixed-used districts are on the rise, and the pioneer of quantitative trading, Jim Simons, dies at 86.

Related resources:

• Adobe: E-commerce Spend Grows to $331.6 billion, as Consumers Trade Down to Cheaper Goods Online
• How Chipotle created a culture of throughput
• Why mixed used districts are on the rise
• Jim Simons, the math genius, Cold War code-breaker, and pioneer of quantitative trading who conquered Wall Street, dies at 86