Infinity Portfolio Plus Update May 2024
Broader Market Moves
Key Market Drivers
Volatility returned to equity markets last week after hawkish Fed minutes and strong services, manufacturing and jobs data all dented investors’ hopes for imminent rate cuts in the US. This combination of factors triggered the worst session in more than a year for the 30-stock Dow Jones index on Thursday but another bumper earnings report by Nvidia helped the major US indices finish in positive territory.
The Nasdaq closed +1.4% for the week, while the S&P 500 was basically flat. Without the benefit of the US bounce on Friday night, profit-taking and lower commodity prices drove weakness across Asian markets, including Australia, with the S&P ASX 200 chalking up a -1.1% loss for the week.
Nvidia continued its upward charge, adding 9% after announcing an earnings beat, strong guidance and a 10-for-1 stock split. The AI juggernaut’s move through the $1,000 share price benchmark coincided with a 6-week high in bullishness by individual investors in the AAII Investor Sentiment poll, which at 47.0% remains above the historic average of 37.5% for the 28th week in 29.
Fed Minutes released on Wednesday showed some appetite for raising US rates despite Chairman Powell previously intimating three weeks ago that such a move was unlikely. JPMorgan Chase Chairman and CEO, Jamie Dimon, added his voice to the prospect, when he said a hard landing for the US economy cannot be ruled out and that interest rates could still go up “a little bit”. This hawkish mood weighed on gold and oil during the week, down -3.3% and -2.9% respectively.
Minutes of the May RBA meeting, where rates were kept on hold, were also published during the week. Whilst the Board discussed raising rates, policy was assessed to be restrictive (particularly for households) and risks around forecasts were seen as balanced. The Board also indicated that it wanted to avoid "excessive finetuning" of policy in response to "short-term variation" in inflation.
Macro/Economic Newsflow
According to provisional PMI data from S&P Global, US business activity growth accelerated sharply to its fastest pace in just over two years in May (54.4 actual vs 51.1 forecast). The service sector led the upturn (54.8 from 51.3) but manufacturing also saw improvement (50.9 from 50.0).
The number of people claiming unemployment benefits in the US fell by 8,000 to 215,000 in the previous week, below expectations of 220,000. New jobless claims fell in 33 of the 53 states and territories that reported figures, and in regions where claims rose the reported increases were small, implying continued strength in the labour market.
Meanwhile, minutes from the last FOMC meeting noted that participants remained highly attentive to inflation risks, and suggested the disinflation process might take longer than initially expected. Participants discussed maintaining the current restrictive stance for longer, with some expressing a willingness to tighten policy further should additional inflationary pressures materialise.
Australia's Westpac-Melbourne Institute Consumer Sentiment index fell 0.3% to 82.4 in May, continuing its decline after a 2.4% fall in April. It was the third straight decrease despite Federal Budget measures designed to boost employment and ease cost-of-living pressures.
Next week shapes as a quieter one for data, with US markets closed on Monday for Memorial Day. When back at their desks, Wall Street analysts will be focused on the revised US Q2 GDP figure (est. 1.5%) and the Core PCE inflation metric (est. +0.2% month-on-month and +2.7% year-on-year). Locally, our market will absorb Retail Sales (est. +0.3%) and monthly CPI (est. 3.4%) for April.
Stocks in the News — S&P/ASX 200
Major Share Price Moves — Infinity Portfolio Plus
NB: These stocks sit across one or both of the Infinity Portfolio Plus Quality Growth and Quality Core Model Portfolios.
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