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If you “sold in May and went away”, as the saying goes, you would have missed out on another positive month, albeit a minor one. The market proves to be resilient, and political turmoil in Washington and global uncertainty appear to be the only obstacles to continued growth. We witnessed a one-day Dow decline of 373 points mid-month as a result of concern regarding the fate of tax reforms and stimulus. But this single day drop – the worst since last September – was quickly erased.  Another negative factor in the market’s performance was attributed to the leaked memo from FBI Director Comey, in which President Trump apparently requested the FBI drop the investigation of former Directory Flynn.

The market closed the month of May with mixed results. The Nasdaq rose 2.07%, the S&P increased .99%, the Dow finished up .24%, while the Russell 2000 lost -1.46. Volatility appears to have returned to the markets, as witnessed by large swings and a heightened VIX.

During the month, President Trump took his show on the road, with his first international trips as Commander-in-Chief to Saudi Arabia, Israel, Vatican City, Brussels and Italy. While he was generally well-received, the results of the trip were mixed: the meeting with Saudi Arabia appeared constructive, but the meeting NATO and G7 members seemed confrontational. In any event, he now has returned home to face allegations of Russian interactions, while continuing work on the pre-election promises including tax reform and infrastructure spending.

International events continue to impact the markets. Macron’s French presidential victory provided relief that his county would remain in the Eurozone. China was downgraded by Moody’s for the first time in nearly 30 years, due to rising debt levels. (China responded with cries of “inappropriate methodology”). And North Korea continues to rattle its saber, firing a missile into the Sea of Japan and warning the US of further surprises.

In terms of sectors, every sector except Energy and Financials posted monthly gains. The top-performers for the month were Technology (4.12%), Utilities (3.62%), and Consumer Staples (2.36%). The worst-performing sectors were Energy (-3.13%), Financials (-.34%), and Materials (-.28%). For the year, Technology leads the pack, with over a 17% gain, and Energy is the laggard, almost 13%.

The yield on the 10-year Treasury fell — basis points in May to 2.21, the largest one month yield decline in seven months. The FOMC met during May and reiterated the strength of the economy and the likelihood of further rate increases this year and a reduction in the Fed’s balance sheet. The odds of a 25 basis point increase in June now stand at 83%. We still maintain that a pullback in equities will result in a flight to quality and safe haven assets. We don’t expect a huge move in yields – somewhere between 50 basis points to a maximum of 3% by the end of August.

Oil ended the month again below $50, marking its third straight monthly loss. While major oil producers have agreed to extend crude outputs through March of 2018, many economists now fear an oversupply of oil once the deal expires. Some now believe that prices need to stay below $50 a barrel to dissuade US shale companies from investing further in production.

Economic indicators showed mostly positive results in May. Economic data showed the pace of growth in the first quarter wasn’t as bad as an initial read: The estimates were raised from .07% to 1.2%. The April employment report showed steady hiring, with an average 185,000 jobs added monthly this year, and the unemployment rate fell to 4.4% – the lowest since May 2001. The University of Michigan’s consumer sentiment indicator inched up from 97 in April to 97.1 in May. And the Chicago Purchasing Managers Index rose to 59.4 from 58.3 – its highest level in 2 ½ years (any reading above 50 indicates improving conditions). The latest monthly inflation rate as measured by the Consumer Price Index (CPI-U) increased 0.2% for the month of April, as reported by the Bureau of Labor Statistics (BLS). This rise occurred after a .03% fall in March. Over the last 12 months, the all-items index rose 2.2% before seasonal adjustment.

There appears to be the right conditions for economic growth, but we expect continuing obstacles to government action this summer, with domestic and international distractions in the forefront. Nonetheless, the markets are fundamentally sound for the long-term horizon investor.