Portfolio Manager Commentary

May 15, 2024

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 ISM Manufacturing Index fell to 49.2 in April, versus 50.3 in March. The PMI Manufacturing Index fell to 50.0 in April, versus 51.9 for March. The ISM Services Index fell to 49.4 in April, compared to 51.4 the previous month. The U.S. Unemployment Rate rose slightly to 3.9% in April, from 3.8% in March. The NFIB Small Business Index rose to 89.7 for the month of April, versus 88.5 in March. The NAHB Housing Market Index was notably lower at 45, the first decrease in homebuilder sentiment since November 2023. Average Hourly Earnings were up 3.9% year over year, the lowest annual change since June of 2021. Consumer Prices were up 0.3% in April and 3.6% year over year. Producer price increases have accelerated in recent months, as headline PPI increased 2.2% year over year in April.

Fixed Income

The U.S. Treasury Yield Curve remains inverted; however, this inversion has continued to remain somewhat flat. The 10-year yield is currently 4.45%, 37 basis points below the 2-year yield of 4.82%. After reaching 4.81% in late April, the current 30-year Treasury yield now sits at 4.59%. The U.S. Treasury Yield Curve has now been inverted for 22 months. The FOMC has held its Fed Funds target rate range at 5.25% to 5.50% since last July. Currently, the CME FedWatch Tool predicts the FOMC will cut the Federal Funds target rate 1-2 times later this year. However, bond markets are more speculative, only pricing in a 35% chance of one rate cut this year.

Yield Curve

Current Generic Bond Yields

Equity

The S&P 500 Index has rebounded sharply since its pullback in April. The index is up 4.32% since May 1 and is approaching a new all-time high. Year to date, the leading sectors are Communication Services (+18.63), Utilities (+12.24%), and Information Technology (+12.02). The sectors with the largest drawdowns this year include Real Estate (-5.61%), Consumer Discretionary (+2.43%), and Health Care (+5.05%).

After consolidating gains in April, Growth stocks continue to outperform Value stocks. The Russell 3000 Growth Index is up 11.36% this year, while the Russell 3000 Value Index is up just 6.76%. Equity markets have performed well this year even as expectations for rate cuts continue to be pushed further into the future.