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June 1, 2024 Market Update

For the trading week through Friday, May 31st, the S&P 500 Index dropped 0.5%, ending five straight weekly advances.  The decline, however, was modest, leaving the market near a record high on the back of a strong 10.6% year-to-date rally.

The bond market lost ground again, slipping for a second straight week, based on Vanguard Total Bond Market ETF (BND), a proxy for investment-grade corporate and government bonds.  Despite slight back-to-back losses, the fund continues to trade in a middling range relative to 2024 prices.

Undoubtedly you have heard of former President Trump’s conviction of low-level felonies relating to an effort to conceal a so-called hush-money payment to a porn star ahead of the 2016 presidential election.  Trump has denied the affair and said he is being prosecuted for political reasons.

As Americans, we all are left to decide how the unprecedented criminal conviction of a former U.S. president will affect the way we vote in November.  As investors, we need to consider if the guilty verdict could impact our investments.

Wall Street seems largely split on whether the reelection of President Biden or former President Trump would be better for the stock market or the economy as a whole.  As a result, it is more likely than not that the conviction will not have a major influence on the stock or bond market in the short term.

What is clear is that former President Trump’s conviction does not prevent him from being reelected as the Constitution imposes no restrictions on the presidency related to a felony conviction.  However, the potential impact of his conviction on his 2024 presidential campaign is multifaceted and uncertain.  

Some polls taken before the conviction suggest that undecided voters may be less likely to vote for former President Trump now that he has been found guilty.  Conversely, news reports suggest that contributions to the former President’s campaign surged following the verdict announcement.  According to a post on X by his campaign, so many Americans were moved to donate that the campaign’s WinRed pages crashed.  Moreover, mega donors -- such as casino billionaire Miriam Adelson and hotelier Robert Bigelow -- announced they would be donating millions more to his campaign following the verdict.

There is little certainty as to how the outcome of the election will affect the markets in the long term.  While presidential elections may bring short-term volatility to stock markets and can influence expectations about future interest rates, there is little empirical evidence to suggest how either candidate’s election would impact stock or bond prices over longer periods.

In short, as an investor I encourage you to, as the Brits like to say: Keep calm and carry on as this tumultuous election cycle unfolds.  November 5th is only five months away on the calendar, but from a political perspective there’s still a long road ahead.

That’s all for now.  Have a great weekend and invest wisely my friends.