Friday, May 30, 2008

May 2008 Rewind - Commodities Crosscurrents

This May, the major U.S. equity indices showed mixed results as commodities roared higher. Large-Cap technology was once again the clear leader with the S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices posting monthly changes of +1.07%, -1.42% and +5.99%, respectively.

Although the mood on the street was generally positive throughout the month and volatility remained moderate, equities peaked mid-month against the daily onslaught of record commodity prices in the news. The Federal Reserve's April meeting minutes highlighting a narrower vote to cut rates than imagined, and more warnings of stagflation ahead certainly did not help. This outlook also negatively impacted bond prices, which were doubly hit by an unwinding of the "safety trade."

Oil hit a high of nearly $135 per barrel, only to fall back towards the very end of the month, punctuated by a large drop in the face of reduced supply as the U.S. Dollar strengthened and commodities speculators decided to take profits. However, with the hurricane season officially kicking off this weekend, prices have perhaps yet to see their true test against Goldman Sachs' prediction of $150 to $200 per barrel.

Meanwhile, Style-Box performance was again firmly in the Growth camp all along the capitalization spectrum, with particular strength shown in both the Mid-Cap categories. Although Technology issues performed particularly well this month (albeit selectively so), the Financials continued to struggle.

The Style Box below was calculated using the following PowerShares™ ETFs: Small-Growth (PWT), Small-Value (PWY), Mid-Growth (PWJ), Mid-Value (PWP), Large-Growth (PWB), and Large-Value (PWV).

The Standard & Poors 500, Dow Jones Industrial Average and NASDAQ 100 may be traded through ETF proxies, including the SPY or IVV, DIA and QQQQ, respectively.

Sentiment: Positive
Volatility: Moderate(VIX 16-20)
Direction: Range-Bound

No comments: