This Weekly Financial Markets Update reviews the top market headlines: Jobs Growth Slows in May, Business Surveys Depict Measured Expansion in May, Federal Reserve Initiates Portfolio Runoff
  • U.S. nonfarm payrolls increased by 390,000 in May
  • The ISM Manufacturing and Services indices registered 56.1% and 55.9%, respectively, in May
  • The Federal Reserve will begin reducing its balance sheet by $47.5 billion per month in June

Top Three Market Headlines

Jobs Growth Slows in May: The Labor Department reported last week that U.S. nonfarm payrolls rose by 390,000 in May, the smallest monthly increase over the last 12 months. The largest gains were in the leisure and hospitality sector, which added 84,000 jobs; even with these gains, however, total employment in this sector remains almost 8% below the pre-pandemic level in February 2020. The unemployment rate held at 3.6% in May, maintaining the lowest level seen since December of 1969. The report also reflected the continued wage pressures facing businesses, as hourly earnings increased at a rate of 5.2% versus the prior year.

Business Surveys Depict Measured Expansion in May: U.S. business activity continued to expand in May, according to surveys by the Institute for Supply Management (ISM). The ISM Manufacturing Index ticked up in May to 56.1% from 55.4% in April (a reading above 50% indicates expansion of activity, while a sub-50% mark reflects contraction). On the other hand, the ISM Services Index registered its lowest reading since February of 2021, falling to 55.9% from 57.1% the previous month. This was the 24th consecutive month that both indices exceeded 50%, though rates of expansion have decelerated from levels seen throughout most of 2021.

Federal Reserve Initiates Portfolio Runoff: The Federal Reserve has officially began shrinking its $8.9 trillion balance sheet, which had swelled as officials enacted an aggressive quantitative easing, or bond buying, policy to support the economy in the wake of the pandemic. The Fed is implementing the reduction through a passive "runoff" procedure, meaning it won't reinvest the proceeds of a portion of its bond holdings as they mature. Beginning this month, the Fed will allow up to $30 billion of Treasury bonds and $17.5 billion in mortgage-backed securities to run off its portfolio; in September, those amounts will increase to $60 billion and $35 billion, respectively. At this point, the central bank has not announced an end date to the runoff.

As of June 06, 2022 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World -0.52% -8.39% -13.30% -7.29%
S&P 500 -1.15% -9.04% -13.23% -0.60%
Russell 2000 -0.22% -8.84% -15.70% -16.44%
MSCI EAFE -0.28% -6.15% -11.70% -11.13%
MSCI Emerging Markets 1.77% -6.60% -13.11% -21.50%
FTSE NAREIT -1.89% -11.18% -14.61% 0.01%
Bloomberg Commodity -0.02% 7.73% 35.25% 43.86%
Barclays U.S. Aggregate -0.88% -3.55% -9.28% -8.35%

CNN 6/3/2022, Labor Department 6/3/2022, Institute for Supply Management 6/1/2022, 6/3/2022, WSJ 6/2/2022. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Gallagher Fiduciary Advisors, LLC ("GFA") is an SEC Registered Investment Adviser that provides retirement, investment advisory, discretionary/named and independent fiduciary services. GFA is a limited liability company with Gallagher Benefit Services, Inc. as its single member. GFA may pay referral fees or other remuneration to employees of AJG or its affiliates or to independent contractors; such payments do not change our fee. Securities may be offered through Triad Advisors, LLC ("Triad"), member FINRA/SIPC. Triad is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad. Neither Triad, Arthur J. Gallagher & Co., GFA, their affiliates nor representatives provide accounting, legal or tax advice.