Monthly Market Summary
- The S&P 500 Index gained +0.5% in May, outperforming the Russell 2000 Index’s -0.8% return. There was significant sector return dispersion with Technology, the top performer, gaining +8.9% and Energy, the worst performer, returning -10%.
- Corporate investment grade bonds produced a -1.8% total return as interest rates rose, underperforming corporate high yield bonds’ -1.2% total return.
- The MSCI EAFE Index of developed market stocks traded down -4.0%, underperforming the MSCI Emerging Market Index’s -2.4% return.
May 2023 Recap: Stocks Continue to Diverge & Treasury Yields Rise
May marked a continuation of this year’s investment trends. In the equity market, large cap stocks outperformed small cap stocks for a third consecutive month, while Growth stocks continued to outperform Value stocks. The Nasdaq-100 Index of growth stocks returned +7.9% in May, bringing its year-to-date gain to +30.9%. Congressional debt ceiling negotiations were the primary focus in the credit market, where a sharp rise in yields led both Treasury and corporate bond prices to decline. The Bloomberg Commodity Index traded lower for a sixth consecutive month, with declines across energy and metals. While falling commodity prices could help ease inflation, the declines suggest demand is softening and economic activity is slowing.
One theme we are watching closely is the return gap within the equity market. As an example, the S&P 500, which weights companies by market capitalization, is up +9.7% year-to-date. However, the equal-weighted version of the S&P 500 has posted a -0.7% total return, underperforming the market-cap weighted version by -10.3%. This performance dispersion theme is also evident across S&P 500 sectors. Technology, Communication Services, and Consumer Discretionary each traded higher in May, with year-to-date returns exceeding +17.5%. In contrast, the eight remaining S&P 500 sectors each traded lower in May with negative returns thus far in 2023. The sizable performance gaps indicate that while the S&P 500 is trading higher, the gains and strength are concentrated in a relatively small group of sectors and mega cap stocks.
Investors Excited by the Artificial Intelligence Revolution
One of the factors contributing to Technology’s strong 2023 return is excitement around artificial intelligence, or AI. AI, which refers to the ability of a digital computer or a machine to perform tasks commonly associated with human intelligence, is being hailed as the next big technological advance. It has the potential to revolutionize the economy by increasing productivity, replacing and/or automating certain jobs, and expanding corporate profit margins. Companies are mentioning AI more on earnings calls, and investors are rushing to find the big AI winners. While AI has the potential to be transformational, we believe the AI revolution is in its early innings. We will continue to watch the theme, but investors’ excitement may be premature today.

Important Notices & Disclaimer
The information and opinions expressed herein are solely those of PFG Private Wealth Management, LLC (PFG), are provided for informational purposes only and are not intended as recommendations to buy or sell a security, nor as an offer to buy or sell a security. Recipients of the information provided herein should consult with their financial advisor before purchasing or selling a security.
The information and opinions provided herein are provided as general market commentary only, and do not consider the specific investment objectives, financial situation or particular needs of any one client. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor.
The comments may not be relied upon as recommendations, investment advice or an indication of trading intent. PFG is not soliciting any action based on this document. Investors should consult with their financial adviser before making any investment decisions. There is no guarantee that any future event discussed herein will come to pass. The data used in this publication may have been obtained from a variety of sources including U.S. Federal Reserve, FactSet, Bloomberg, Bank of America Merrill Lynch, iShares, Vanguard and State Street, which we believe to be reliable, but PFG cannot be held responsible for the accuracy of data used herein. Any use of graphs, text or other material from this report by the recipient must acknowledge MarketDesk Research as the source. Past performance does not guarantee or indicate future results. Investing involves risk, including the possible loss of principal and fluctuation of value. PFG disclaims responsibility for updating information. In addition, PFG disclaims responsibility for third-party content, including information accessed through hyperlinks.
No mention of a particular security, index, derivative or other instrument in the report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security, index, or derivative. The report is strictly an information publication and has been prepared without regard to the particular investments and circumstances of the recipient.
READERS SHOULD VERIFY ALL CLAIMS AND COMPLETE THEIR OWN RESEARCH AND CONSULT A REGISTERED FINANCIAL PROFESSIONAL BEFORE INVESTING IN ANY INVESTMENTS MENTIONED IN THE PUBLICATION. INVESTING IN SECURITIES AND DERIVATIVES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK, AND READERS MAY LOSE MONEY TRADING AND INVESTING IN SUCH INVESTMENTS.
PFG Private Wealth Management, LLC is a registered investment advisor.