Heritage Market Brief – May 2016

Each month, our Heritage Investment team publishes a market brief to provide an overview of the major factors influencing the US economy, including a summary of key sectors and the current positives & challenges.

Click here for the May 2016 update.

Here are some key highlights:

POSITIVES

o With a recent increase in fuel consumption, a series of supply disruptions, and production outages, global supply has somewhat rebalanced and driven crude oil prices to new 2016 highs

o The nation’s trade deficit narrowed more than expected to $37.4 billion and should positively impact second quarter 2016 GDP

o While consumer confidence remains somewhat mixed, future income expectations ticked up along with an increase in consumers expecting to buy a car or home within the next 6 months

o Labor markets continue to show strength as highlighted by a 7,500 decline in the four- week moving average of jobless claims to 269,500

CHALLENGES

o The World Bank once again lowered its global growth estimate by 0.5% to 2.4% citing a weaker outlook for commodity exporters and a challenging external environment with soft investment amid weaker growth prospects and elevated policy uncertainty

o The service sector, which is driven by the strength of the domestic consumer, is turning noticeably lower as indicated by a decline of 2.8 points in the ISM non-manufacturing index to 52.9 as well as a decline of 1.5 points in the services PMI to 51.3

o As wages continue to lag, inflation remains flat with the PCE Core Index struggling to meet the Fed’s 2% target

o The nation’s oil patch still remains in extended contractionary territory despite WTI surging 60% since February; as long as oil prices remain stable to increasing, these territories should start to benefit