Last week, big news was small news, and small news was made smaller with positivity being the driving force. In these environments, especially coming into the summer season, some investors choose to find rest in the calm, somewhat peaceful waters. However, as previous White House Press Secretary and founding member of the public broadcasting system Bill Moyers said, “Creativity is piercing the mundane to find the marvelous,” and both market bulls and bears used this mundane time to strengthen their positions.
Most market movements supported the bull case, with the S&P climbing +2.58%, NASDAQ +3.25%, DOW +1.25%, and the Russell 2000 +0.52%. Semis and software were industries that had the most tailwinds, while energy and banks lagged (albeit the trend of bigger banks outperforming regionals continued). Rates remained neutral, with Aggregate Bonds predominantly flat. Gold was down -0.3%, alongside a weaker dollar as tracked by DXY. Oil clawed back, after weeks of decline, rising +2.5% and breaking $70/barrel. Gains in the market also increased in breadth, where more than just the biggest names outperformed and carried the index higher — a major change to prior weeks.
In economic news, Wednesday’s release of the FED pausing rate hikes took center stage. The decision and remarks made were in line with investor sentiment, but Chairman Jerome Powell wanted to ensure the markets knew that this was not an indefinite pause and to plan for approximately two more hikes this year. With headline CPI coming in at 4.0% y/y and core CPI 5.3% y/y (removing food and energy) on Tuesday, the FED argued that we have moved from an inflationary to a disinflationary environment. This means the pace of inflation has slowed and/or the move could be temporary. Other economic releases, including retail sales, hourly earnings, workweek, and productivity metrics had little to no variation to market expectations.
This week, markets have a four-day trading week with the observance of Juneteenth on Monday. Housing data was the focus Tuesday, as consumers and builders continue the push-pull of higher rates and strong demand. Thursday, the Department of Labor releases data on Initial Unemployment Claims and Continuing Jobless Claims, which will be a major contributor to FED decision making, as it directly relates to their mandate of employment stability.
With most news this week reflecting market expectations, both market bulls and bears dug their heels in deeper. Bulls pointed to the breadth of market gains and cooling inflation, while bears pointed to unwarranted market optimism and issues not yet resolved (high interest rates, building debt, uncertain banking future, etc.). Uncertainty remains and there are very wise perspectives on both sides of the issue. Times like this remind us of Proverbs 3:5-6, “Trust in the Lord with all your heart, and do not lean on your own understanding. In all your ways acknowledge him, and He will make straight your paths.” While markets continue fighting for which argument is right, we will continue to be diversified, seeking solid opportunities regardless of short-term outcomes.
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