Estados Unidos
Banking turmoil and debt limit tensions persisted, offset by artificial intelligence demand
During May, investors faced uncertainties ranging from consolidation in the banking industry, to U.S. debt limit negotiations and an ongoing divergence between economic data in the manufacturing and services sectors. Through it all, markets rallied on a small subset of large-cap and growth equities.
The month began with the failure of First Republic Bank, leaving the FDIC to take over its third bank of 2023. J.P. Morgan subsequently acquired most of their assets. While we do not expect further contagion in the banking industry, investors remain hesitant of bank stocks. The KBW Bank Index (which represents 24 regional banks) was down 6.0% for the month, adding to a year-to-date decline of more than 23%.
By month end, the market’s focus was on U.S. debt limit negotiations. Early in the month, Treasury Secretary Janet Yellen announced the anticipated x-date (when the U.S. Treasury’s funding runs out) of 1ro de junio. As a result, the yield on Treasury bills maturing 1ro de junio climbed, ultimately peaking at nearly 7% on 24 de mayo. However, by month end, news of a tentative deal helped ease market concerns. The price for 1-year credit default swaps against a federal government default subsequently fell to the lowest level since the debt ceiling was breached in mid-January.
Domestic equity markets finished higher in May, raising the year-to-date return for the S&P 500® to nearly 10%. Gains were powered by the rally in growth stocks, driven by Nvidia Corporation’s blockbuster earnings report that showed strengthening demand for artificial intelligence. Market leadership so far this year has been narrow, led by the largest companies within a few sectors.
Figura 1. S&P 500 Equal Weight Index Total Returns
S&P 500 performance has been driven by the largest stocks
Al 31/05/2023. Fuente: Morningstar
Ver la versión accesible de este gráfico.
Information Technology, Communications Services and Consumer Discretionary posted gains, while the value investment style turned lower as the outlook for a slowing economy weighed on more cyclical sectors.
While economic activity remains positive, growth continues to slow. The second revision to first quarter GDP improved to a 1.3% annualized rate, although it remains below the prior quarter’s growth rate of 2.6%. PNC Economics continues to expect GDP to contract in the fourth quarter. In our view, continued economic strength has been supported by the resilient labor market. The May payroll report added 339,000 net new jobs, a significant upside surprise versus the consensus estimate of 195,000. Additionally, while jobless claims have moved higher since September, the unemployment rate remains near historical lows, signaling the labor market remains tight.
A downside to continued economic strength is the persistence of inflation. Although the April Consumer Price Index reading fell to 4.9% versus the consensus estimate of 5.0%, the Fed’s preferred inflation indicator, Core Personal Consumption Expenditure, accelerated to 4.7% from the prior month’s 4.6%. Notably, both measures remain well above the Fed’s 2% target. We believe persistently high inflation is pressuring the Fed to leave interest rates higher, for longer. Consumer spending has been robust so far this year, but recent data on both consumer spending and confidence are showing signs of easing amid elevated inflation, rising interest rates and banking industry turmoil.
As expected, the Federal Reserve (Fed) raised interest rates by 25 basis points (bps) at the May Federal Open Market Committee meeting, lifting the fed funds target rate range to 5.00-5.25%. While the Fed upheld the possibility for additional rate increases, we believe the end of the tightening cycle is near.
First quarter earnings season for the S&P 500 proved better-than-feared as companies handily beat low earnings expectations. The blended earnings growth rate (consensus estimates combined with actual results) of -2.1% was an improvement from the initial consensus estimate of -6.9% at quarter-end, due to an above-average upside surprise of nearly 650 bps. En nuestra opinión, la desaceleración económica prevista para este año aún no se refleja en las estimaciones de utilidades de consenso, que han ido aumentando en las últimas semanas.
Fixed income performance declined as long-term interest rates increased in May in response to positive surprises in corporate earnings and economic data, as well as uncertainty regarding the debt limit debate. Despite the rise, investment grade and high yield credit spreads were largely unchanged for the month, signaling that while significant macroeconomic uncertainty remains, it has yet to meaningfully impact credit markets.
Mercados desarrollados internacionales
Recessionary risks rise, U.S. dollar strength a headwind
The MSCI World ex-USA Index delivered negative returns in May, with Japan being the only country to deliver a positive return, due to its robotics and artificial intelligence exposure.
Cyclical stocks led the decline as economic indicators continued to point to elevated recessionary risks. Revised GDP data for Germany, Europe’s largest economy, fell into negative growth for the second consecutive quarter. Additionally, leading economic indicators in the region continue to point to weakness, particularly in manufacturing. HCOB Eurozone Manufacturing PMI® is now at 44.6, a three-year low and firmly in recession territory. HCOB Eurozone Services PMI is considerably better at 55.9; however, we expect the strength in services to fade as the impact of tighter monetary policy fully develops (Figure 2).
Figure 2. Developed International Aggregate Manufacturing and Aggregate Services PMI
EU, Japan and U.K. Services PMI is strong, but should converge with manufacturing
A partir del 31/05/2023. Fuente: Bloomberg, L.P.
Ver la versión accesible de este gráfico.
First quarter earnings results were robust, but we continue to believe consensus estimates, at this stage of the business cycle, are too lofty for the remainder of the year. The calendar year 2023 earnings-per-share growth estimates for the index is 1.9%, whereas earnings typically range from -5% to -10% during recessionary periods. In our view, 12-month rolling earnings revisions also have yet to reflect recessionary risks or tighter lending conditions. While the next-12-month price-to-earnings multiple of 13.0x might appear attractive, we believe the cyclical nature of sectors such as Financials and Industrials make the price multiple less appealing.
Mercados emergentes
China’s reopening has yet to fire on all cylinders
MSCI Emerging Markets Index performance was led by Taiwan and South Korea in May, bolstered by artificial intelligence stocks. Conversely, China was the biggest laggard of the index, returning -6.8% for the month. Investor sentiment on emerging markets appears negative given the consensus 2023 earnings estimate of -7.0%, the lowest growth rate among major global indices.
Recent weak economic data in China caused market optimism to cool from a strong bullish sentiment at the end of 2022 to expectations for in-line growth in 2023. The official GDP target for the year is currently 5%.
Like the United States, strength in China’s labor market has been a positive for the global economy, with the urban jobless rate falling to a 16-month low of 5.2%. Although youth unemployment remains high, we believe labor market strength should underpin the recovery in household income.
Figure 3. Unemployment in China
Overall unemployment rate improving, but youth unemployment is high and on the rise
Al 31/05/2023. Fuente: Bloomberg, L.P.
Ver la versión accesible de este gráfico.
Para obtener más información, comuníquese con su asesor de PNC.
VERSIÓN DE TEXTO DE GRÁFICOS
Figure 1: S&P 500 vs. S&P 500 Equal Weight Index Total Returns
S&P 500 performance has been driven by the largest stocks (view image)
Fecha |
Equal Rated Total Return (%) |
Total Return (%) |
31/12/2022 |
0 |
0 |
31/01/2023 |
6.28 |
7.39 |
28/02/2023 |
3.69 |
3.85 |
31/03/2023 |
7.50 |
2.93 |
01/05/2023 |
9.17 |
3.28 |
31/05/2023 |
9.65 |
-0.63 |
Al 30/04/2023. Fuente: FactSet®. FactSet® es una marca registrada de FactSet Research Systems, Inc. y sus compañías afiliadas.
Figure 2: Developed International Aggregate Manufacturing and Aggregate Services PMI
EU, Japan and U.K. Services PMI is strong, but should converge with manufacturing (view image)
Fecha |
Aggregate Services PMI |
Aggregate Manufacturing PMI |
31/05/2023 |
55.8 |
47.4 |
31/03/2023 |
54.3 |
48.1 |
30/12/2022 |
50.3 |
47.3 |
30/09/2022 |
50.3 |
49.2 |
30/06/2022 |
53.8 |
52.5 |
31/03/2022 |
55.9 |
55.3 |
31/12/2021 |
52.9 |
56.7 |
30/09/2021 |
53.2 |
55.7 |
30/06/2021 |
56.2 |
59.9 |
31/03/2021 |
51.4 |
58.0 |
A partir del 31/05/2023. Fuente: Bloomberg, L.P.
Figure 3: Unemployment in China
Overall unemployment rate improving, but youth unemployment is high and on the rise (view image)
Fecha |
En todo el país |
Age 16-24 |
30/04/2023 |
5.2 |
20.4 |
30/04/2022 |
6.1 |
18.2 |
30/04/2021 |
5.1 |
13.6 |
30/04/2020 |
6.0 |
13.8 |
30/04/2019 |
5.0 |
9.9 |
30/04/2018 |
4.9 |
10.1 |
Al 31/05/2023. Fuente: Bloomberg, L.P.
