Presented by The PensionmarkMeridien Team, July 2024
Overall, diversified, long-term equity investors were in command throughout June as the recent rally continued amid hopes for rate cuts. Signals of inflation easing were evident in various economic data reports scattered throughout the month.
MAJOR STOCK INDEXES
The recent stock market rally has been centered around the technology and artificial intelligence (AI) theme. Tech & AI giant NVIDIA has continued to propel broader averages, including the S&P 500 and NASDAQ 100, higher.
For the month of June, the S&P 500 added 3.47%1, the NASDAQ 100 tacked on 6.18%2, and the Dow Jones Industrial Average rose by 1.12%3.
PAYROLL WHOPPER
The employment report for May, released in June, showed a surprising increase in job numbers, with 272,000 new jobs created4, surpassing the estimated 190,000. This was a significant jump from the 175,000 jobs added in April.
There was a brief pause in the bullish market activity on the day of the data release (June 7th) ahead of the then-upcoming Federal Reserve meeting.
The recent job gains were primarily seen in the healthcare, government, and leisure and hospitality sectors, in line with ongoing trends. This trend signals a strong economy and raises questions about the timing of any potential interest rate cuts.
SUPPORTIVE U.S. INFLATION DATA
June brought wonderful news for rate-cut-hopeful bulls, with inflation-busting optimism in full swing.
CONSUMER PRICE INDEX:
As usual, markets were hyper-focused on the Consumer Price Index (CPI) data release. May’s month-over-month pricing showed no increase, and there was a 3.3% increase from a year ago, both below market expectations. The Core CPI, which excludes food and energy prices, rose by 0.2%5 compared to April, falling below the predicted 0.3%. The annual core CPI rate unexpectedly decreased to 3.4% from 3.6% in April, below the anticipated 3.5%. Stock bulls loved the news.
The S&P 500 and Nasdaq 100 reacted positively to the softer inflation data and traded near all-time highs. The Dow 30 didn’t follow suit, but their average dividend yield was around 1.99%6 as of June 29th.
PRODUCER PRICE INDEX:
With consumer pricing showing some signs of normalization in June, attention turned to producer pricing.
For May, the Producer Price Index (PPI) for final demand unexpectedly fell by 0.2% on a monthly basis, contrary to expectations of a 0.1% increase. This is positive news for those watching for potential interest rate cuts. Core PPI (which excludes food and energy) remained unchanged in May, falling below the expected increase. Year-over-year, Core PPI decreased to 2.3% in May7, below the estimated 2.4%.
QUOTE OF THE MONTH
The expert at anything was once a beginner
—Helen Hayes
FED MEETING, REACTION, & OUTLOOK
As anticipated, the Fed decided to keep rates unchanged at its June policy meeting and hinted at taking a more aggressive stance on future Fed interest rate policy.
In terms of future rate cuts, the Fed has indicated that it is considering one rate cut in 2024.
“We believe that policy is restrictive. And we believe that if you maintain policy at a restrictive level, you will eventually see a real weakening in the economy,” Powell stated. “So, our stance has always been that, ever since we raised rates this much, we have always been open to the possibility of cuts at some point.”
“While we are not ruling out the possibility of rate hikes, no one considers it as the most likely scenario,” Powell added.
Given the softer inflation data and the Fed’s signal of a potential cut in 2024, it seems like a solid backdrop as we head into the second half of the year.
TREASURY YIELDS STEADY/QUIET IN JUNE
Treasury yields were slightly lower in June versus May, with thewidely monitored 10-year Treasury Note Yield closing the month near 4.342%8 — about 17.3 basis points lower than May’s closing level of 4.515%.
Market participants are constantly calculating probabilities for Fed rate cuts, with the latest data to close June showing a 10.9% probability of a rate cut at the July 31st meeting and a 63.4% chance of a rate cut9 at the following meeting on September 18th.
The steady to slightly lower rates during June were welcome news for mortgage borrowing activity, with the average 30-year fixed mortgage closing the month of June close to the psychologically important 7% level10.
The housing market seems to be in the midst of a shift in many locales as inventory has been growing.
THE TAKEAWAY
May featured a resumption of the rally for major stock indexes, solid corporate earnings overall, slightly lower interest rates, varying economic data, and a Fed that should be supportive going forward as long as inflation cooperates.
As June began, the S&P 500 was working off a monster rally on the last day of the month. Was it month-end books squaring or perhaps a sign of what is to come in June? We will find out as the month unfolds.
With that monthly overview noted, if you have questions or needs arise, feel free to reach out anytime at the phone number or email address listed below. We are always here as a resource for you.
The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com
Do you want to receive articles like this or Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)
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. 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.
Citations:
1. Trading View, June 28, 2024
2. Trading View, June 28, 2024
3. Trading View, June 28, 2024
4. CNBC, June 7, 2024
5. CNBC, June 12, 2024
6. SlickCharts, July 30, 2024
7. CNBC, June 13, 2024
8. Trading View, July 1, 2024
9. CME Group, July 3, 2024
10. Mortgage News Daily, July 3, 2024
Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark and WIA Holdings, LLC (“World”) are affiliated through common ownership with Pensionmark Securities, LLC. Securities offered through Pensionmark Securities, LLC (Member FINRA/SIPC).