Portfolio Manager Commentary

May 15, 2023

The Portfolio Manager Commentary is provided by Trustmark’s Tailored Wealth Investment Management team. The opinions and analysis presented are accurate to the best of our knowledge and are based on information and sources that we consider to be reliable and appropriate for due consideration¹.

Economic Outlook

The Markit Purchasing Managers’ Index (PMI™) came in at 50.2 for April versus 50.4 for April. The ISM Manufacturing Index came in at 47.1 for April versus 46.7 for March. On the Services side, the Markit PMI was 53.6 for April versus 51.9 for the ISM PMI. Durable Goods Orders were +3.2% in March. Overall Non-Farm Productivity was -2.7% in the first quarter of 2023 versus +1.6% for the fourth quarter of 2022. Unit Labor Costs were up 6.3% in the first quarter of 2023 and Average Hourly Earnings were up 4.4% (both annualized). The Consumer Price Index was up 0.4% for April and up 4.9% year over year. The Producer Price Index was up 0.2% and up 2.3% year over year. The Small Business Index came in at 89.0 for April versus 90.1 for March. The University of Michigan Sentiment came in at 57.7 for May versus 63.5 for April. Finally, the U.S. Unemployment Rate came in at 3.4% for April.

Fixed Income

The U.S. Treasury Yield Curve remains inverted, with the 10-year yield trading at 3.56%, 53 basis points below the 2-year yield of 4.09%. At its recent May meeting, the FOMC raised the Federal Funds target rate 0.25%, to a range of 5.00% -5.25%. The minutes of this meeting reflect that the FOMC may be close to ending its recent torrent of interest rate increases. After the meeting, Fed Chair Powell noted, “We feel we are getting closer, or maybe even there.”

Yield Curve

Current Generic Bond Yields

Equity

US equity has been largely devoid of directional conviction as the S&P 500 is down -0.78% for the month. Headlines seemed to be centered around the UMich consumer sentiment report, which posted a decline larger than expected, the ongoing debt ceiling stalemate, and the Feds next course of action regarding rate hiking/cutting. Word from the White House is that meetings regarding the debt ceiling have been productive so far, though there seems to be mixed takeaways regarding the progress of development. On the fed funds rate front, the market is expected the Fed to hold in their June meeting with a 50/50 chance to begin cutting around late fall (of course, this information can easily change with new economic data).

Tech (+21.46%), Communication Services (+25.13%), and Discretionary (+14.81%) continue to outperform for the year with growth (11.16%) leading the charge over value (6.90%). After seeing massive gains in 2022, Energy (-1.77%) is one of the largest underperformers, with Financials (-2.57%) underperforming the most.