Listening Fully

Despite the shortened trading week, due to the Juneteenth holiday, indexes saw a sizable bounce. The Dow Jones, S&P 500 and NASDAQ jumped more than 5%, 6% and 7%, respectively. Several intertwined storylines seemed to drive buying.

Indicators pointed to markets appearing ‘oversold,’ after several consecutive down weeks, leading analysts to expect some level of rebounding. This momentum helped sectors that took the hardest “hits,” like Tech and Healthcare, see the largest gains.

More interestingly, two opposing forces wrestled to see which would influence trading throughout the week. On the negative side, Federal Reserve policy, raising interest rates to ‘cool’ economic growth, weighed on sentiment. On the positive side, indicators of a slowing economy began easing demand expectations for oil, leading to a price drop. This, in turn, buoyed optimism of staving off inflationary pressures.

The week also saw a mixed bag of economic reports, including lower existing home sales than expected (new home sales remained high). Weekly jobless claims and Consumer Sentiment numbers were both generally in line with estimates. This week brings much weightier reports, as preliminary Gross Domestic Product numbers are released Wednesday and consumer spending on Thursday, both of which could influence upcoming Federal Reserve decision making.

Although, over longer periods of time, Wall Street tends to act rationally in favor of full information, in times like these, markets can move quickly and erratically. Whether in response to rumors or partial information, investments often behave like someone who reacts before getting the whole story. Of course, as Proverbs 18:13 states, “If one gives an answer before he hears, it is his folly and shame.” Selling on knee-jerk reactions precipitated by the markets’ own irrational behavior does not exhibit wisdom. As our team makes decisions based on changing economic conditions, we are doing our best to listen fully before making appropriate moves.

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