Hello all - we hope you had a nice June.
Yes, the month hasn’t ended yet so this commentary is a bit premature, but we figured it was close enough and you wouldn’t mind anyway.
It was a decent month for the markets, too. Stocks started very strong, but lost ground later in the month. The Dow has risen just about 3%, the S&P 500 gained just over 4%, and the Nasdaq, which has a higher concentration of tech stocks, rose about 4.4%.
Yes, the month hasn’t ended yet so this commentary is a bit premature, but we figured it was close enough and you wouldn’t mind anyway.
It was a decent month for the markets, too. Stocks started very strong, but lost ground later in the month. The Dow has risen just about 3%, the S&P 500 gained just over 4%, and the Nasdaq, which has a higher concentration of tech stocks, rose about 4.4%.
Here’s a look at how the markets moved this month:
As June ends, so does the second quarter and first half of the year. It’s been a good first half of the year for the markets, too. The Dow is up modestly, but the tech stocks in the Nasdaq have performed very well and boosted the index to its best first half since 1983!
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THE FED
The Fed was back in the news as it held another policy meeting. As expected, they held off on raising interest rates – for now.
Prior to now, many investors believed the Fed would actually cut interest rates later in the year. They think the economy will slow and that will force the Fed to lower rates to stimulate the economy.
However, the Fed seems intent on raising interest rates at least once - and possibly twice - later this year.
That will be a headwind for investors looking for more stimulus to boost stocks.
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INFLATION
We’ll first look at inflation before getting into the other economic data. As you can see in the chart below, inflation continues to move lower.
However, that is looking at inflation on an annual basis. When you look at inflation month-by-month, inflation is still rising every month.
Inflation is also steadily rising when we exclude food and energy from the calculation (which economists call the “core” measurement).
Inflation at the business level looks to be turning the corner and is coming down, which is a good sign for us as shoppers.
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ECONOMIC DATA
The data released this month had both some bright spots and some dark spots.
We’ll first look at an indicator we’ve discussed a lot recently, which is the leading economic indicator index. It combines many other indicators that tend to signal the direction of the economy (like weekly unemployment numbers, building permits, etc.).
This index has been lower for 14-straight months. It has never gone this low without a recession following.
The manufacturing and service sectors of our economy both showed weakness.
On the bright side, retail sales were higher again.
Durable goods (these are items with a longer life, like a phone or refrigerator) were higher again, too.
Consumer confidence took a nice turn higher, hitting its best level in two years.
Small business optimism saw a slight gain last month, though it remains very low.
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Where does the market go from here?
Markets became very overbought (expensive) this month and we were relieved when they moved lower in the later part of June (yes relieved, since we were positioned for a pullback). Stocks became oversold (cheap) near the end of the month in the very short term, so we think a slight bounce can continue here.
We aren’t sure how long any rise will last, though. July has been a very solid month from a historical standpoint (it has been higher 9 of the last 10 years), but we think the longer trend is lower. We aren’t looking for a sharp drop, at least not yet, but would be a little cautious in the longer term.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
