2023 | June 5

The Market

Stocks Gain

Lifted by a strong monthly U.S. jobs report and the resolution of the debt ceiling battle, stocks rallied on Thursday and Friday as the major indexes posted weekly gains of around 2%. The results pushed the S&P 500 above a narrow range that it has traded in since the start of April.

The NASDAQ’s latest weekly gain was its sixth in a row, the longest streak for the index since a string that ended in January 2020. At Friday’s close, the NASDAQ was at its highest level since April 2022.

Although U.S. stocks generally traded in a narrow range throughout May, performance varied widely among the major indexes. The NASDAQ rose 5.8%, the S&P 500 gained 0.3%, and the Dow fell 3.5%. At the S&P 500 sector level, information technology posted the strongest result while energy had the weakest.

The first five months of 2023 produced widely varying returns at the sector level. Within the S&P 500, the information technology sector was up more than 33% year to date through May while communication services added 32%. Overall, 8 out of 11 sectors posted negative results, with energy down nearly 13% and financials down almost 8%.

U.S. labor market strength again exceeded economists’ expectations, as the 339,000 jobs added last month came in well above the consensus forecast. The latest monthly figure was just below the 12-month average monthly gain of 341,000 jobs, and the totals for March and April were revised upward by a total of 93,000 jobs.

Financial market fears of a potential U.S. credit default were lifted as the House of Representatives and the Senate approved an agreement to lift the government’s debt ceiling for another two years. The measure was sent to the White House to be signed into law in advance of a June 5 deadline, by which the government faced the risk of being unable to pay its bills.

An index that measures investors’ expectations of short-term U.S. stock market volatility fell around 19% for the week, dropping to the lowest level in more than three years. The CBOE Volatility Index (VIX) sank on Friday to 14.6, just above its level before the start of the COVID-19 pandemic in February 2020.

Inflation in the countries that use the euro currency eased more than expected in May, with the annual inflation rate dropping to 6.1% from 7.0% the previous month. May’s figure was the lowest for the eurozone since February 2022.

Source: John Hancock Investment Management

Federal Budget Deficit to GDP

About National Debt

Americans are more concerned about reducing the budget deficit than they have been in the past, according to a Pew Research survey.

When the United States spends more than it receives, there is a budget shortfall (aka, a deficit). Each annual deficit adds to previous annual deficits. The total of all deficits (offset by any surpluses) plus interest owed is the national debt. So far this year, the U.S. Treasury reports the government has:

• Received $2.7 trillion (less than last year).
• Spent $3.6 trillion (more than last year).
• A year-to-date shortfall is $925 billion.

When that shortfall is added to the total already owed, the national debt is about $31.5 trillion. Our national debt includes two types of borrowing:

78% is publicly held debt ($24.6 billion). This includes Treasury securities sold to investors at home and abroad. The amount has grown by 106% since 2013. One of the biggest owners of public debt is the Federal Reserve system, which holds almost 20 percent of publicly held national debt, according to Pew Research.

22% is intragovernmental debt ($6.9 trillion). The U.S. government owes this money to federal trust funds and accounts. The amount has grown by 40% since 2013. One of the government’s biggest creditors is the Social Security system. “…the program’s retirement and disability trust funds together held more than $2.8 trillion in special non-traded Treasury securities, or 9% of the total debt.”

Last week, Congress voted to raise the debt ceiling, which is the limit on the national debt.

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