THE WEEK ON WALL STREET
Stocks rallied last week, propelled by growing optimism over reaching a deal on raising the debt ceiling and avoiding a technical debt default by the U.S. The Dow Jones Industrial Average edged 0.38% higher, while the S&P 500 gained 1.65%. The Nasdaq Composite index advanced 3.04% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 0.47%.
FACT OF THE WEEK
In a ceremony on May 23, 1911, presided over by President William Howard Taft, the New York Public Library, the largest marble structure ever constructed in the United States, is dedicated in New York City. Occupying a two-block section of Fifth Avenue between 40th and 42nd Streets, the monumental beaux-arts structure took 14 years to complete at a cost of $9 million. The day after its dedication, the library opened its doors to the public, and some 40,000 citizens passed through to make use of a collection that already consisted of more than a million books.
In the late 19th century, New York had surpassed Paris in population and was quickly catching up with London, then the world’s most populous city. Unlike these cities, however, it lacked a public library large enough to serve its many citizens. In 1886, former New York Governor Samuel J. Tilden died, bequeathing to the city $2.4 million to “establish and maintain a free library and reading room in the city of New York.” The gift remained unspent until May 23, 1895, when New York’s two largest libraries–the Astor and Lenox libraries–agreed to combine with the Tilden Trust to form a new entity that would be known as The New York Public Library. Sixteen years later to the day, the main branch of the library was dedicated in midtown Manhattan.
During the next few decades, thanks in large part to a $5.2 million gift from steel baron Andrew Carnegie, a system of branch libraries opened throughout New York City. Today, the New York Public Library is visited and used annually by more than 10 million people, and there are currently well over two million cardholders, more than for any other library system in the nation.
Possible Debt Deal
After stumbling on weak April retail sales and a combination of disappointing earnings and weak guidance from a major retailer, stocks moved higher mid-week as the news on the debt negotiations turned more positive. The prospect of an agreement helped to lift a cloud of uncertainty that had weighed on markets in recent weeks and sparked sufficient optimism to shake off comments by the Dallas Fed President, who indicated that economic data may not support a pause in rate hikes yet. Aiding the market’s upbeat mood was a positive update on deposit growth at a troubled regional bank. Stocks surrendered some of the week’s gains on Friday following reports of an impasse on debt talks and comments by Fed Chair Powell.
Recent updates have suggested that the housing market may be staging a turnaround after a long period of contraction. Last week’s data contained some fresh evidence of revival and caution that any potential recovery may remain further out. The first positive sign was an increase in home builder sentiment that put the National Association of Home Builders Housing Market Index’s confidence level at the midpoint for the first time since July 2022. An unexpected 2.2% rise in housing starts in April followed. These encouraging reports, however, were followed by a disappointing 3.4% decline in April existing home sales.
FINANCIAL STRATEGY OF THE WEEK
Powell delivered on his March promise at the most recent Fed meeting by increasing short-term rates by 0.25%, just as the financial markets expected.
"Economic activity expanded at a modest pace in the first quarter," he said at the press conference following the May meeting. "Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated. The U.S. banking system is sound and resilient."
Yet despite Powell's confident tone, investors are cautious. In the accompanying charts, you can see that the S&P 500 is essentially unchanged in the past 12 months. And yet, investors have pulled more cash to the sidelines in 2023. There are several reasons this may be happening, some of them emotional.
At the same time, we're monitoring markets for any opportunities that may arise. Or, in the blunt words of Warren Buffett, at Berkshire Hathaway's 2023 May annual shareholder's meeting, "What gives you opportunities is other people doing dumb things."
With your portfolio, we created a strategy based on your goals, time horizon, and risk tolerance. If one of those three changes, let me know as soon as possible, and we can make adjustments if necessary. If nothing has changed with you, let's leave the "market timing" to others.