July 28, 2023, Weekly Stock Market Return Recap. For the week the S&P 500 finished up 1%, the Dow +0.7% and the Nasdaq +2%. The equity markets continue to be propelled by positive job reports, high consumer confidence, consumer spending, corporate earnings and higher than expected 2nd quarter GDP numbers. The Federal Reserve hiked the target range for its benchmark interest rate by 0.25% on Wednesday and left the door open to more rate increases. The rate hike increased the interest range to 5.25% and 5.5%, the highest level since March 2001. The Fed reiterated in their view on inflation as “elevated,” and they remain “highly attentive” to inflation risks. Further, the Fed stated “Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.” The Bureau of Economic Analysis’s advance estimate of second quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 2.4% during the second quarter of 2023 period, faster than consensus forecasts. Economists surveyed by Bloomberg had the US economic growth estimated at an annualized pace of 1.8% during the period. However, despite the previous forecast misses, Wall Street now sees Q3 and Q4 GDP growth slowing to 0.5% and -0.4%, respectively. The S&P 500 has far exceeded most of Wall Street’s year-end return predictions, defying concerns over recession risks, inflation, and monetary tightening. The unexpected market surge has forced most strategists to revise their forecasts upwards.
July 14, 2023, Weekly Stock Market Return Recap. Earnings season hit Wall Street running with positive news and these releases moved US stocks upward on the week. The Nasdaq jumped 3.3%, the S&P 500 increased 2.4% and the Dow finished up 2.3%. Consumer prices rose at the slowest pace since March 2021 as inflation showed further signs of cooling in June, rising 0.2% over last month and 3% over the prior year in June. This increase, however, was only a slight acceleration from May’s 0.1% month-over-month increase.
July 7, 2023, Weekly Stock Market Return Recap. The Dow fell 2%, the S&P 500 declined 1.2%, and the tech-focused Nasdaq Composite edged down 0.9% for the week. US equity markets continue to be rattled by economic resiliency, reigniting Fed hawkish fears. Indeed, stronger-than-expected average hourly earnings together with upward revisions to wage growth are indicators that more rates increase might be on the horizon. Insofar as the US economy added 209,000 jobs in June missed the Wall Street 225,000 estimates, in turn, the ADP Employment report for June had private employers adding 497,000 jobs, well above Bloomberg consensus estimates for 225,000. The strong economic data drove up Treasury yields, which jumped to some of the loftiest levels on the year with the 10-year Treasury note yield rising to 4.047%
July 1, 2023, Weekly Stock Market Return Recap. The three major equity indexes notched winning weeks, gaining more than 2% each on news that the consumer was still driving the economy. Indeed, US Consumer Sentiment Is Improving according to the University of Michigan sentiment index, which rose to 64.4 in June from a preliminary reading of 63.9; that marked a rebound from a May slump. However, with the stocks clearly back in the bull market, there remains a divide on Wall Street on whether this bull run will last or revert to new lows. The primary golden rule in stock market investing is “don’t fight the Fed” and Fed Chair Powell says inflation isn’t returning to 2% this year or next, which translates to more interest-rate hikes ahead. Further, the yield curve remains inverted and historically, after the yield curve inverts, it takes roughly 15–months for the economy to officially enter a recession. Given this benchmark timeline together with the fact that the yield curve inversion occurred about a year ago, the economy could enter a recession in October of this year. History also tells us that most Fed tightening cycles do not end in a soft landing. Over the past 11 tightening cycles, all but three resulted in an economic recession, or statistically there is a 73% chance of recession ahead.