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Market Recap – May 20, 2024

Keel Point

May 20, 2024

Financial markets greeted positively the April consumer and producer price index data showing inflation slowed for the first time this year.  The yield on the 10-year U.S. Treasury declined, and the S&P 500 closed the week up 1.5% and up 11.2% so far in 2024. 

  • Core CPI inflation was 3.6% over the last 12 months versus 3.8% in March. This, along with a slow-down in retail sales, provides evidence to the Federal Reserve that inflation is again declining.
  • Although the Fed’s preferred inflation metric – core PCE (Personal Consumption Expenditures) – isn’t reported until later in the month, using data provided in the CPI and PPI, it looks like core PCE increased in April by around 0.20% — markedly lower than in January to March 2024 and closer to the Fed’s 2% inflation target.
  • Control group retail sales and manufacturing output both fell in April, and first quarter numbers were revised down (Capital Economics), raising expectations that the 1.6% Q1 GDP growth estimate may be revised down, and that Q2 GDP growth may be weaker than expected.
  • Consumer spending doesn’t seem to be breaking, however, and the Atlanta Federal Reserve’s GDPNow estimate for 2024 second quarter real GDP growth currently is 3.6% (annualized) with real personal consumption expenditures growing at a 3.4% annualized rate.

Both President Biden and former President Trump espouse further protectionist measures against China and other nations which at some levels will increase prices to U.S. consumers and thus U.S. inflation.

  • Last week, after the scheduled review of the existing Trump tariffs on goods from China, the Biden administration determined that the existing tariffs should remain in place and that additional tariffs should be put in place on products in “strategic sectors”, mainly relating to clean energy, including tariffs being increased on electric vehicles (from 25% to 100%), on lithium-ion batteries (from 7.5% to 25%), and on semiconductors and solar cells (both from 25% to 50%).
  • While these tariff increases won’t have a material impact on U.S. inflation because the U.S. doesn’t import much of these items from China, former President Trump also has proposed imposing a 60% (or higher) tariff on all imports from China and on some goods from Europe which would cause U.S. prices of these imports to increase thereby stimulating further U.S. inflation.


Disclosure:  Securities offered through Keel Point Capital, LLC, Member FINRA and SIPC.  Brokerage and Investment Advisory Services are offered under the Keel Point brand. Investment Advisory Services offered by Keel Point, LLC, an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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