May market recap

May market recap


While media attention was focused on the debt ceiling, a large theme in capital markets in May was a divergence of U.S. mega-tech and everything else.

International stocks were down, bonds were down, commodities were down, and the average stock in the S&P 500 was down nearly 4% for the month. However, the seven largest “tech-considered” stocks (not all officially classified in the technology sector) were all positive, driving the total U.S. stock market to a modest gain overall.

Mega tech chipping in

The mega tech leadership was underway early in the month but gained steam late when Nvidia announced much stronger than anticipated demand for powerful chips needed to power the most advanced artificial intelligence (AI) applications. Development of AI is expanding, and Chat GPT has created mainstream excitement. Our view is that AI will have profound impact and accelerate disruption in many areas, probably less than most expect in the short term more in the longer term. AI will drive efficiencies in almost all industries, and the ultimate winners and losers are likely to be surprising. 

Debt ceiling agreement reached

The debt ceiling pushed close to the edge, but not as close as many expected. Ultimately, the Biden administration was able to reach an agreement with Speaker Kevin McCarthy, which pushes the issue out for another two years. It was a rare show of reasonable bipartisan negotiation. Stocks moved only modestly higher in the days following the news, showing most participants were expecting a resolution. Still, the agreement removes a meaningful risk from the calendar this year.

Outlook on rate hikes

The Fed is expected to pause rate hikes at its June meeting to assess the outlook and see the impact of existing interest rates. Given strong jobs numbers and sticky inflation, the Fed may increase rates again later in the summer. While many still expect a recession to materialize later this year, based on the shape of the yield curve, markets are expecting a good chance for at least one more increase and are no longer expecting meaningful rate cuts until at least 2024.

Tip: Use the Empower Retirement Planner to forecast the impact of a recession on your long-term financial plan.


Craig Birk, CFP®


Craig Birk is the Chief Investment Officer for Empower Personal Wealth. A CERTIFIED FINANCIAL PLANNER™ professional, he is responsible for Empower’s retail investment portfolio, providing strategic and executive direction to drive the optimal management of client assets.

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