Let’s Make a Deal

The focus last week was on debt ceiling negotiations going into the Memorial Day Weekend. While relieving some pressure, it has set this week to likely be decisive on the matter. Thematically, Artificial Intelligence (AI) drove telecom and tech, with healthcare lagging on regulatory setbacks and clinical failures. Stock indices were mixed last week, with the S&P 500 up 0.32%, the Dow Jones down -1.00%, and the NASDAQ up 2.51%. Bonds sold off on expectations on “high for longer” rates. The Bloomberg Agg ended down -0.52%. Alternatives continued to be mixed, with Bitcoin futures down -0.50%, gold down -1.88%, and silver down -2.91%, while oil rose 1.37%.

Last week saw new home sales (SAAR) come in above consensus and up month after month at 683,000. Wednesday saw the release of the prior FOMC meeting minutes and shifted market expectations towards a .25% hike scenario in the June meeting. Thursday brought in Q1 2023 GDP, which came in near consensus and relatively flat, while the week ended with PCE numbers showing a modest surge in inflationary pressures.

Although the biggest news the rest of this shortened week will likely be any mention of debt ceiling negotiations, the week also brings economic indicators that will further illuminate the coming FOMC meeting on June 13-14. Speeches from Philadelphia Reserve Bank President Harker, FED Governor Jefferson, and FED Governor Bowman will yield a trifecta of insights into policy direction. Thursday will bring jobless claims and the ADP employment Survey as a prelude to the payroll prints on Friday. Friday ends the week with Payrolls data and Unemployment rate, where we expect to slight tightening in the labor market and a barometer reading going towards the FOMC meeting.

Markets have seen opportunities in AI, as NVIDIA joined the ranks of Trillion-dollar companies on a record one-day gain and massive expectations beat. Networking and chip fabrication has shared in the thematic AI driver, as the softening on computing power seen with shifts in Crypto have been replaced with AI and machine-learning needs. Conversely, Target and AB Inbev have seen difficult waters, as they have taken stances on lifestyles ahead of Pride Month in June provoking negative reactions from both sides. Target has seen shares fall more than -5% this quarter while BUD is down over -10%.

In geopolitical events, the conflict in Sudan continues, although both sides to the conflict agreed to continue the ceasefire to allow humanitarian aid to reach those impacted. The United States and Saudi Arabia brokered the deal, and it has been violated by both sides. The war in Ukraine continues to evolve, as Russia saw at least eight drones in the skies over Moscow bringing the war home to the Russian people. In Turkey, Tayyip Erdogan won the run-off election for president and secured another 5-year term in office where he faces economic headwinds and difficult foreign policy.

As we reach the week of anticipated clarity on the debt ceiling, we expect heightened market volatility on the terms of a deal and subsequent influx of Treasuries into the market. The current theme of AI is driving markets, and the implications it has in our lives, our careers, our education is still unknown. As society looks for new ways to use this tool for our benefit, we must also ask ourselves if it serves His purpose. Matthew 26:14-15 informs us that not all deals are focused towards honoring Him. “Then one of the twelve, named Judas Iscariot, went to the chief priests and said, ‘What are you willing to give me to betray Him to you?’ And they weighed out thirty pieces of silver to him.”

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