May 9, 2023

Market Commentary

June Market Recap

June was another positive month for stocks and the broader economy. The mega-cap S&P 500® Index (SPX), the tech-heavy NASDAQ Composite Index (COMP), and the popular Dow Jones Industrial Average® (DJIA) all delivered gains while consumer confidence jumped to its highest level in 18 months. The Federal Reserve (Fed) decided not to raise rates at its latest meeting, opting instead to see how the economy reacts to previous rate hikes. A likely reason for the move is that inflation numbers continue to show a slowing trend. Still, prices across many categories remain high and overall inflation remains above the Fed’s 2% goal. 

Stocks Rise Again
June marked the fourth month in a row that stocks in the SPX and the COMP went higher. Demonstrating that investors and traders alike still have strong demand for technology stocks, the COMP led the way in June, gaining 6.6% on the month. The SPX was also up, gaining 6.5% on the month. Meanwhile, June marked the third month out of the last four that the DJIA rose, climbing 4.6% over the course of the month. The SPX and COMP are developing a consistent pattern of higher monthly lows since late 2022, a potentially positive sign for stocks because higher lows can indicate buyers are willing to pay more for shares. 

Consumer Confidence Pops
Reflecting a sunnier disposition among American consumers – which account for 70% of economic activity – consumer confidence jumped to its highest level in 18 months in June. The consumer confidence index rose to 109.7 in June from 102.5 in May, which was its highest reading since January 2022. The jump was also higher than economists’ forecasts. The Present Situation Index – a gauge of how consumers feel about the current labor and business conditions – rose to 155.3 in June from 148.9 in May. Meanwhile, the Expectations Index, which measures how consumers feel about labor and business conditions over the next six months, went up as well, reaching 79.3 in June compared to 71.5 in May despite persistent recession fears. Source: APConference Board. 
The Fed Hits the Pause Button
During its latest meeting, the Fed put the brakes on its aggressive monetary tightening campaign when it decided to not raise interest rates. This marked the first time since March 2022 – and the first time in the last 10 meetings – that the central bank left interest rates unchanged, maintaining a target rate between 5% and 5.25%. According to the Fed’s announcement, “the Committee decided to maintain the target range for the federal funds rate at 5 to 5-1/4 percent. Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy.” But it also said that while the “banking system is sound and resilient…tighter credit conditions for households and business are likely to weigh on economic activity, hiring, and inflation.” That last part could signal more hikes down the road. Some estimates are calling for the federal funds rate to top out in the 5.63% to 5.87% range for 2023. Sources: CNN, Federal Reserve
Inflation Continues to Ease
Prices in the US continue to moderate, according to the latest report from the US Bureau of Labor Statistics. The widely watched Consumer Price Index (CPI) rose just 0.1% in May, which translates to prices rising 4% in May. That amounts to the smallest annual increase since March 2021, when inflation began to surge to its highest levels in 41 years. If you take away the more volatile components of food and energy, core inflation rose 0.4% for the month and 5.3% for the year. These numbers were all in line with Dow Jones consensus estimates. While prices continue to fall overall, inflation remains above the Fed’s 2% goal, which could mean that the Fed’s work isn’t done yet. Prices in many categories also remain high: Food prices in June were up 6.7% compared to a year-ago, shelter was up 8% and transportation was up 10.2%. Source: CNBC

This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.

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