June 19th, 2023 Weekly Market Insights

Stocks climbed last week as reassuring inflation data boosted investor hopes that the rate-hike cycle was nearing an end amid fresh economic data pointing to continued economic resilience.

Markets embraced Goldilocks economic data and largely discounted the Fed’s plans for additional rate hikes into year-end while AI-focused investments continued to outperform and global disinflation trends were gaining momentum.

The S&P 500 rose 2.58% on the week and is now up 14.85% YTD and the Dow Jones Industrial Average rose 1.25%. The Nasdaq Composite index gained 3.25% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.42%.^1,2,3

Stocks Rally

Stock market momentum gathered steam last week, blowing past the 4,300 and 4,400 thresholds in the S&P 500–a remarkable feat considering the time it took to break the 4,200 resistance level. 

Optimism was high to begin the week, with expectations that fresh evidence of cooling inflation would provide the Fed room to pause on further rate hikes. The data cooperated as consumer prices rose 4.0% year-over-year (the lowest 12-month number in two years), and producer prices increased 1.1% from a year ago.⁴

The Fed’s “hawkish pause” briefly unsettled investors, but after some reassessment and aided by healthy economic data, stocks rallied before slipping on Friday as ECB President Lagarde reiterated that inflation is too high and a July rate hike is likely. Stocks began to pullback after Lagarde’s comments and the S&P 500 ended near the lows, down 0.37% but notably just above support at 4,400.

With the S&P at 4,400, the market is trading on an 18.3X valuation, which given the macroeconomic reality is about as “best case” at this time with all the global macro uncertainty. However, bullish momentum and chasing  stock market rallies can continue to push the S&P 500 higher from here, but at these levels and above it is important to realize that stocks are reflecting a future economic and market “nirvana” where 1)disinflation occurs, 2) Growth remains solid and 3) in 2024 S&P 500 earnings expectations of $240 not only stay solid, but actually rise. Stay tuned. . . . 

More Rate Hikes To Come?

Federal Reserve officials kept rates steady at last week’s Federal Open Market Committee (FOMC) meeting. However, a majority of committee members indicated at least two more quarter-point rate hikes were likely before year-end.⁴

Fed Chair Jerome Powell commented that he saw progress in fighting inflation and that no decision was made regarding any future rate increase, saying that members will assess the economic impact of the cumulative rate hikes before the July 25-26 FOMC meeting.⁵

The Fed raised its 2023 economic growth forecast to 1%, up from its March forecast of 0.4%. The Fed also lowered its unemployment projection to 4.1% from its earlier estimate of 4.5%.⁶

This Week: Key Economic Data

Tuesday: Housing Starts.

Thursday: Existing Home Sales. Index of Leading Economic Indicators. Jobless Claims.

Friday: Purchasing Managers’ Index (PMI) Composite.

^{Source: Econoday, June 16, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday: FedEx Corporation (FDX).

Thursday: Darden Restaurants, Inc. (DRI).

^{Source: Zacks, June 16, 2023
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

"Kindness eases change. Love quiets fear."

– Octavia E. Butler

3 Facts About Capital Gains

When you sell a capital asset, like an investment or a piece of property, the sale can result in a capital gain or loss. The Internal Revenue Service (IRS) defines a capital asset as “almost anything you own for personal use or own as an investment.” Here are three facts you should keep in mind:

1. A capital gain or loss is the difference between what you originally paid for the asset (your basis) and the amount you get when you sell an asset.
2. The IRS may allow you to deduct capital losses on the sale of an investment or piece of property.
3. If your total net capital loss is more than the limit you can deduct, you may be able to carry it over to next year’s tax return.

*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁷

Finding Inner Peace Inside (And Indoors)

Practiced for thousands of years, yoga has had a revival in the last couple of decades. Yoga can be an optimal exercise choice for many individuals of all ages. But before getting started with any fitness regimen, discuss any medical concerns with your healthcare provider; this information is not a substitute for medical advice.

While there are many different styles of yoga, it is generally a low-impact form of exercise. But in addition to the fitness benefits, it can help you learn relaxation and breathing techniques and how to regulate emotions and quiet your mind. It’s also a great form of indoor exercise, and there are thousands of free classes on YouTube. So, if you’re looking for a way to promote both physical and mental health, you can practice quieting your inner monologue and start doing yoga from the comfort of your home.

Tip adapted from Yogabasics.com⁸

A major league pitcher faces just 27 hitters in a baseball game. He retires all of them, allowing no runs and no hits. Still, his team loses the game 4-0. How is this possible?

Last week’s riddle: A common English word refers to a person or thing not being in a place. But just by inserting a space within it, you can get two words meaning that a person or thing is present. What is this word? Answer: which breaks into now here.

Mt. Tamalpais State Park, Marin County, California

Footnotes And Sources

^{1. The Wall Street Journal, June 16, 2023.} 

^{2. The Wall Street Journal, June 16, 2023.}

^{3. The Wall Street Journal, June 16, 2023.}

^{4. AP News, June 14, 2023.}

^{5. CNBC, June 14, 2023.}

^{6. CNBC, June 14, 2023.}

^{7. IRS.gov, January 26, 2023}

^{8. Yogabasics.com, February 15, 2023}

^{Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.}

^{The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.}

^{The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.}

^{The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.}

^{U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.}

^{International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.}

^{Please consult your financial professional for additional information.}

^{This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.}

^{Copyright 2023 FMG Suite.}