Tag: interest rates

Monthly Economic Update: November

Written by support@seostats.com on November 12, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: Mixed data into November election

Presented by The PensionmarkMeridien Team, November 2024

There was no shortage of market activity in October, with corporate earnings, a looming presidential election, and heavily scrutinized labor market data in the spotlight. Monthly payroll data showed extreme weakness on November 1st to get the fresh month started, but the U.S. stock indexes didn’t mind too much on the first day of the trading month. We will see how markets further digest this data.

Tallying October (traditionally known as the most volatile month of the year), the S&P 500 fell by 0.99%¹, the NASDAQ 100 shed 0.85%², and the Dow Jones Industrial Average was lower by 1.34%³.

EARNINGS SEASON UNFOLDS

Earnings results for the third quarter have been mixed⁴ thus far, with some Magnificent 7 companies’ results disappointing and some results pleasing investors.

Shares of Meta and Microsoft fell on earnings (primarily because of future guidance, as earnings beat estimates) and sent a sour vibe through tech stocks during the last week of October. In contrast, shares of Amazon rose on positive results and provided a much-needed boost in sentiment to end the week.

As of November 1st (with 70% of S&P 500 companies reporting actual results), 75% of S&P 500 companies have reported actual earnings per share (EPS) above estimates. In aggregate, these S&P 500 companies are reporting earnings that are 4.6% above estimates, below the five-year average of 8.5% and below the 10-year average of 6.8%, according to data⁵ from FactSet.

Earnings season will continue into November.

INFLATION: MIXED

Inflation data was mixed in October.

CONSUMER PRICE INDEX (CPI):
Data showed a slight warming in inflation on the consumer level. September data, released in October, showed a monthly increase of 0.2% – 0.1% higher than estimates. Annually, the inflation rate was 2.5% year-over-year, the lowest since February 2021⁶ but still a tick higher than Dow Jones consensus estimates for 2.4%.

Core CPI, which excludes food and energy, tacked on 0.3% for the month versus expectations for 0.2%, putting the annual core CPI rate at 3.3%.

Once again, shelter and food prices were the main culprits for the rise in overall consumer inflation, accounting for more than three-quarters of the rise in the all-important consumer inflation metric.

PRODUCER PRICE INDEX (PPI):
Producer pricing (wholesale pricing) data for September, released in October, showed no change, coming in below Dow Jones estimates⁷ for a 0.1% monthly rise. Major stock indexes reacted positively to the data on the day of the data release.

CORE PERSONAL CONSUMPTION EXPENDITURES (CORE PCE):
Ending the month of October, we got mixed Core PCE price index data:

The annual core inflation rate held at 2.7% versus forecasts for a dip to 2.6%.
The personal consumption expenditures (PCE) price index increased by 0.2%, aligning with the consensus forecast.
The 12-month headline inflation rate decreased to 2.1%, which matched estimates and was the lowest headline PCE inflation rate since February 2021.

It remains a mixed picture regarding inflation at the present time.

LABOR MARKET

This data has been driving markets, and a twist and turn surfaced on the November 1st data released. But before we get into that, let’s lay the foundation.

The Federal Reserve implemented its first rate cut of 50 basis points in September in response to weakness in labor market data.

SEPTEMBER LABOR DATA (OCTOBER 7TH DATA RELEASE):
The first labor market data after the Fed’s rate cut was on full display, with 254,000 jobs created⁸ versus Dow Jones estimates for 150,000. The unemployment rate declined by a tick to 4.1% from the previously reported month.

Verdict at the time: The economy is hot — is it too hot? That would change in the next data release.

OCTOBER LABOR DATA (NOVEMBER 1ST DATA RELEASE):
Only 12,000 jobs were created in October, and August and September totals were revised lower by 112,000 combined — not great for the labor market, but maybe good news for rate cut watchers.

The lowest monthly job creation total since 2020 was perhaps somewhat expected, with the effects of Hurricanes Helene and Milton taking their toll last month on the labor market.

As disappointing as the data was, major U.S. equity indexes held together well on the day of, with the Nasdaq, Dow, and S&P 500 all having a positive day.

BULLISH SEASONAL STRENGTH?

Historically, November and December are a strong time of year for U.S. equities.

After October’s dismal yet resilient showing for U.S. stock indexes, market watchers were debating the opportunities in stocks at the start of November, given the inherent uncertainties.

According to 2022 data⁹ from CFRA Research, the S&P 500 has risen in 60% of Octobers, 66% of Novembers, and 77% of Decembers since 1945.

AN IMPORTANT REMINDER

With the election and Fed meeting occurring the first week of November, it’s good to remember that emotions can often lead long-term investors to make hasty decisions that may harm their portfolios in the long run. Consider what happened in 2020 as a prime example.

Timing the market is incredibly challenging. This is why we emphasize the importance of long-term investing. It’s crucial to remember this not only during market downturns but also during periods of market growth.

As always, if you have any questions or needs, do not hesitate to reach out.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

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Citations:
1. Trading View, October 31, 2024
2.            Trading View, October 31, 2024
3.            Trading View, October 31, 2024
4.            FactSet, November 1, 2024
5.            FactSet, October 27, 2024
6.            CNBC, October 10, 2024
7.            CNBC, October 11, 2024
8.            CNBC, October 4, 2024
9.            Money.com, September 30, 2022

Advisory services offered by Pensionmark Financial Group, LLC. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.

Quarter 3 Economic Review

Written by support@seostats.com on October 18, 2024. Posted in Newsroom.

This quarters recap: Volatility, climbing indexes, and rate cut

Presented by The PensionmarkMeridien Team, October 18, 2024

As we head into the final stretch of 2024, I wanted to offer an overview of key developments that occurred in the third quarter.

S&P 500: FOUR STRAIGHT POSITIVE QUARTERS

It’s four positive quarters in a row for the broadest measure of the U.S. economy, the S&P 500,with a remarkable seven out of the last eight quarters in the green¹. Long-term investors have been rewarded (and perhaps spoiled a little bit, dare I say!) for the last year or two.

Regardless of the headlines that have come our way for the last eight quarters (think inflation, high interest rates, government shutdowns, etc.), the broader equity indexes continued to climb.

For the third quarter of 2024, the S&P 500 increased by 5.53%,² the NASDAQ 100 rose 1.92%³, and the Dow Jones Industrial Average jumped by 8.21%⁴, as industrials outperformed.

BROAD ECONOMY

Expectations for lower rates combined with declining inflation remain front and center. The Fed highlighted a “recalibration” message at the last policy meeting, tying the rate cut to a need to stimulate the labor markets as opposed to being a response to a struggling economy.

A 50-basis-point cut is in the books, and the number one question on the minds of the investment community is …

SOFT, HARD, OR NO LANDING?

The rate hike cycle appears to be over, and the Fed’s intended consequences of quelling inflation have seemingly come to fruition in the form of a slowing labor market. Simultaneously, we have seen inflation drop over the last three months, according to multiple metrics.

Now, the Fed is looking to thread the needle by adding some steam into the labor market, but not too much and not too little — essentially creating a Goldilocks scenario of “just right.”

A recession remains a possibility. But there aren’t too many talking about a recession to start the third quarter, as the fresh rate cut creates loosened-up lending markets and provides a dose of stimulus into the economy.

With that said, it’s October and an election year, so anything is possible.

INFLATION SOFTER FOR THE THIRD QUARTER

Consumer Price Index: June consumer pricing, released in July, actually fell on a monthly basis, with data showing a 0.1% monthly decrease from May, two ticks lower than the Dow Jones estimate for a 0.1% monthly increase.

July consumer price Index data showed continued cooling for the month, with the annual inflation rate slowing to 2.9%. The interest rate cut case became more likely.

Finally, August Consumer Price Index data revealed a 0.2% increase in monthly CPI, resulting in an annual increase of 2.5% — the lowest annual inflation rate since 2021 and a 0.4% decline from the previous month. These data releases helped cement the inflation-cooling theme as markets waited on the September Fed meeting, which resulted in a 50-basis-point cut.

AUGUST VOLATILITY SPIKE

While the quarter was positive yet again, it wasn’t without some volatility early in the quarter – and what a volatility spike that was. Even more to marvel at was the speed of its dissipation.

The Japanese Yen carry trade⁵ wreaked some havoc on world financial markets in early August. The effects were felt worldwide but were short-lived.

After spiking above $60⁶, the S&P 500 Volatility Index ($VIX) settled the first week of August’s trading near $20.37. This volatility spike will go down in history books.

LABOR MARKET CONCERNS

As mentioned, labor market concerns popped up in a big way in the third quarter. There were substantial revisions to previously reported labor market data to the tune of 818,000 jobs revised downward over the preceding 12-month period.

Looking at the three non-farm payroll prints during Q3, we see:

206,000 jobs were created in June, in line with estimates, but this is when downward revisions began to the tune of 111,000 downward revisions in April and May.
114,000 jobs were created in July vs.185,000 forecast, a sharp slowdown from June data. Unemployment increased to 4.3%, indicating additional slowdown in the labor market as a whole.
142,000 jobs were created in August vs.161,000 forecasted. There was a notable spike in unemployment.

EARLY SEPTEMBER VOLATILITY

In response, there was some more market volatility in early September, but this pessimism was short-lived. The Fed cut rates by 50 basis points, and the worries faded to black in the eyes of major stock indexes again — at least for now.

Labor market concerns are valid, especially when factoring in the revisions to previously reported labor market data. But we’ll see if the medium-term effects of the rate cut result in some strengthening of the employment markets in the fourth quarter.

Could the rate cut result in a pickup in inflation that everyone is feeling is in the rear-view mirror? It’s possible — we will see if the Fed can thread this narrow needle.

FED OUTLOOK

At the end of third quarter, markets were pricing in a 64.7% probability of a 25-basis-point cut and a 35.3% chance of a 50-basis-point cut at the November meeting, per the CME FedWatch Tool⁷.

There is a general consensus of 50 basis points of further rate cuts in 2024, as suggested by Federal Reserve Chair Jerome Powell himself at a September 30th conference at the National Association for Business Economics.

Remember, however, that the Fed is heavily data-dependent, so additional CPI prints will be considered.

TREASURY YIELD NORMALIZATION

After being inverted for the longest period in history (793 days), the 2/10 yield curve finally uninverted/normalized in September. This means that the 10-year yield is once again higher than the 2-year yield at long last.

The 2/10 yield curve normalization has various interpretations, one of which is that it’s a historical indicator of recession. Yet, other interpretations exist.

MOVING FORWARD

The fourth quarter is usually a good one. But it is still a highly Fed-centric market, with an impending election that will have no shortage of headlines and narratives. But, as long-term investors, we look beyond that.

If headlines dictated market performance, long-term investors wouldn’t be in the position they are in today given the headlines over the last couple of years! Food for thought.

With that said, if third-quarter market developments are on your mind or if there is anything else We can help with, please feel free to contact us at the email address or phone number below..

We are always here as a resource for you.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:

1) Trading View, October 1, 2024
2)Trading View, October 1, 2024
3)CME Group, October 7, 2024
4)Trading View, October 1, 2024
5)Trading View, October 1, 2024
6)CNN, August 7, 2024
7)Trading View, August 11, 2024

Monthly Economic Update: October

Written by support@seostats.com on October 10, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: 50-basis-point rate cut boosts stocks

Presented by The PensionmarkMeridien Team, September 2024

Long-term investors with diversified portfolios had a solid month in September, as the S&P 500 rose for three consecutive weeks. As a bonus, the recent stock index rally was further fueled by a Federal Reserve (Fed) that delivered on a 50-basis-point rate cut.

With the major U.S. equity market indexes continuing their impressive overall upward trajectory since May, now is the perfect time to inform you about key developments over the course of the last month.

MAJOR STOCK INDEXES

The recent stock market rally continued for another month, but it wasn’t without some fireworks at the beginning of the month over labor market concerns.

Amazingly, the S&P 500 had its worst week of 2024 to start the month. Yet by month’s end, it was another month in the green. It is truly amazing how the volatility has come and gone so quickly this year.

Overall, for the month of September, the S&P 500 added 2.02%¹, the NASDAQ 100 tacked on 2.48%², and the Dow Jones Industrial Average was higher by 1.85%³.

FED RATE CUT

In September, the Fed delivered the hugely anticipated rate cut in the form of a 50-basis-point cut to the overnight lending rate, leaving the Fed’s target rate between 4.75 – 5.00%. The rate cut is the first in four years, and the market response was supportive.

Heading into the Fed rate decision, a rate cut was widely expected, and it was just a matter of whether it would be 25 or 50 basis points. The Fed went in the more aggressive direction.

FED MARKET REACTION & EXPECTATIONS

Market reaction to the Fed rate decision the day after the announcement was bullish and was on full display, as the Dow and S&P 500 jumped to record high levels. According to the Fed’s Summary of Economic Projections (SEP), 50 basis points of additional cuts are now expected for 2024, a more dovish and accommodating stance than previously thought.

FED RECALIBRATION

Are you looking for a new financial buzzword? Fed “recalibration” is here! This term originated at the Fed press conference following the interest rate decision.

The message is one of strength surrounding the state of the economy, indicating that the large 50-basis-point rate cut was not executed due to economic weakness, but rather to shore up the labor market .

Markets interpreted the message in the intended fashion, as asset prices soared⁴ the day after the Fed announcement and recalibration message.

SOFTER U.S. INFLATION READINGS

The overall trend for inflation saw some further cooling in September to the delight of stock market bulls.

CONSUMER PRICE INDEX (CPI):

The most recent CPI data released in September (August data) showed inflation continuing to cool on an annualized basis, coming in right at expectations. The report revealed a 0.2% increase in monthly CPI, resulting in an annual increase of 2.5% — the lowest annual inflation rate since 2021⁵. Markets liked it.

Prices of goods and services are still elevated; we don’t need government data to let us know that! But we are making great strides toward the Fed’s 2% inflation target. Many analysts expect the overall inflation-cooling trend to continue, but let’s see how the 50-basis-point cut affects it!

CPI MARKET REACTION:

Markets initially lost some ground upon the CPI data release in September, with the Dow falling 743 points intra-day before mounting its largest intra-day comeback in almost two years.

The trading action came as a result of traders and investors trying to figure out if the data would edge the Fed toward a 25- or 50-basis point cut and whether such an action would translate to a soft or hard landing.

Well, we got the 50 basis points at the Fed meeting, and the current consensus and market reaction is one for a soft landing.

PRODUCER PRICE INDEX (PPI):

The day after we got CPI, producer pricing (i.e., wholesale pricing) was released and showed a rise of 0.2% in August, matching Dow Jones estimates. Major stock indexes came into the day of the release higher from the previous day’s CPI print and continued their upward journey that day.

PERSONAL CONSUMPTION EXPENDITURES (PCE):

The freshest piece of inflation data came towards the end of September in the form of the Fed’s preferred inflation gauge, PCE.

Data showed pricing coming in below expectations⁶, with prices rising 2.2% annually and only 0.1% for the month versus expectations for 0.2%.

2.2%, psychologically, is very close to the Fed’s goal of 2%, and the encouraging data print on the inflation front paves the way toward a rate-cut-friendly Fed in the future.

MIXED LABOR MARKET DATA

September’s monthly jobs report showed another decline in job creation, with 142,000 jobs created in August vs. 161,000 forecasted. Unemployment declined on a monthly basis, however, to 3.9% versus 3.7% forecasted.

The data comes after recent revisions that triggered concern over the labor market. Over the last couple of months, we’ve seen downward revisions⁷ in previously printed job creation data, and they factored heavily into the Fed’s 50-basis-point rate cut decision to shore up the labor market.

TREASURY YIELDS & NORMALIZATION

The 2-year Treasury yield and the 10-year Treasury yield moved lower overall throughout the month, ending September near 3.803%⁸ on 10s and 3.645%⁹ on 2s.

Perhaps more important is the relationship between the 10-year and 2-year yields. We saw the 2/10 yield curve “uninvert” or normalize in September for the first time in 793 days, which represented the longest yield inversion in history. Yield inversion occurs when the 2-year Treasury yield is larger than the 10-year yield.

Well, we are back to normal now. The 2/10 yield curve normalization has various interpretations, one of which is that it’s a historical indicator that portends recession. Yet, other interpretations exist based on where we are.

MIXED CONSUMER DATA

September retail sales data showed an increase of 0.1% in August¹⁰ amid varying expectations. After reaching a six-month high in August, consumer confidence dropped in September to 98.7 versus expectations of 103.9.

So, it was a mixed bag for the consumer last month. We’ll see how the Fed’s rate cut affects the consumer in upcoming data releases.

THE TAKEAWAY

September featured a further continuation of the rally in anticipation of a Fed rate cut, and the market got what it wanted in the form of the 50-basis-point variety. Inflation data showed further signs of encouragement, although the labor market could use some help. We know the Fed has this in mind.

The yield curve “uninversion” or normalization hasn’t commanded too much attention in the media, but we know it has occurred. Election Day themes are a topic of discussion and will continue to be until Election Day and beyond.

Current expectations for 50 basis points more in cuts to come for the rest of 2024. How will the normalization of the yield curve intertwine with any potential further rate cuts? Time will tell.

As always, we’re dedicated to prioritizing long-term goals and strategy while keeping you apprised of current market developments.

If you have questions or concerns, feel free to reach out to us anytime. We are always here as a resource for you.

Wishing you a fantastic October,

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:
1. Trading View, September 30, 2024
2.   Trading View, September 30, 2024
3.   Trading View, September 30, 2024
4.   CNBC, September 19, 2024
5.   CNBC, September 11, 2024
6.   CNBC, September 27, 2024
7.   CNBC, September 6, 2024
8.   Trading View, September 30, 2024
9. Trading View, September 30, 2024
10. Reuters, September 17, 2024

Monthly Economic Update: September

Written by support@seostats.com on September 9, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: Cooling inflation trend continues

Presented by The PensionmarkMeridien Team, September 2024

MAJOR STOCK INDEXES

Inflation readings during August supported the Fed’s broadcasted ambitions, with CPI, PPI, and the Core PCE Price Index cooperating. For the month of September, the S&P 500 rose by 2.28%¹, the NASDAQ 100 shed 1.10%² and the Dow Jones Industrial Average dominated the week’s trading and closed at a fresh all-time monthly closing high–higher by 1.76%³ in August.

CONSUMER PRICING COOLS

The cooling inflation theme continued in August, with supportive data adding to the case for a Fed victory and further heightening the case for rate cuts to come. September looks like a near certainty for the first rate cut⁴–it’s simply a matter of whether it will be 25 or 50 basis points. Consumer Price Index data showed continued cooling for the month, with the annual inflation rate slowing to 2.9%–the lowest since 2021⁵.

GOVERNMENT BOND YIELDS FALL

The benchmark 10-year note yield fell for the fourth consecutive month during August, falling by approximately 19.8 basis points and settling at 3.912%⁶ on the final day of trade in August. As bond yields fall, bond prices rise. The recent drop in interest rates has been a boon for fixed-income investors who have held bonds for an extended period, and for those who decided to dip their toes over the last year amidst higher interest rates. While the rising interest rates of 2022 and 2023 seemed a bit uncomfortable and foreign to many investors, let’s not forget that 10-year note yields have been much higher in the not-so-distant past. 30-year mortgage rates exceeded 17%⁷ in ‘81 and ‘82.

LABOR MARKET DATA – REVISION IN FOCUS

The most recent jobs report showed that employers added 114K jobs in July, a sharp slowdown from June. Unemployment increased to 4.3%⁸, indicating some slowdown in the labor market as a whole.

THE TAKEAWAY

August was a volatile month in the beginning; fast forward a bit, however, and the volatility dissipated swiftly. As September gets going, keep in mind that it’s historically the most volatile month of each year. The fresh month and fall season moving in could create some urgency on some trade desks during this election year. Long-term investors will experience multiple cycles of expansion and contraction over a lifetime. Depending on one’s goals, there may be alternative opportunities in fixed-income, while for others, simply staying the course may be suitable. Remember to think long-term.

With this monthly overview in mind, if you have been considering your options in the financial markets or have questions, please feel free to reach out anytime. I am always here as a resource for you.

Hoping you have a wonderful September!

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:
1. Trading View, September 3, 2024
2.   Trading View, September 3, 2024
3.   Trading View, September 3, 2024
4.   Yahoo Finance, August 26, 2024
5.   MSN, August 21, 2024
6.   Trading View, August 30, 2024
7.   Federal Reserve Bank of St. Louis, August 29, 2024
8.   CNBC, August 2, 2024

Monthly Economic Update: August

Written by support@seostats.com on August 12, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: Narrative shift, rate cut likely

Presented by The PensionmarkMeridien Team, July 2024

After a strong June, major U.S. equity indexes were mixed in July, indicating some divergence and a potential shift in the narrative to come. So far, in limited trading sessions, August is showing a different tone. This change in tone focused on a cooling economy, which has been the Fed’s plan all along by raising rates. However, nerves exist that a soft landing (cooling the economy without a recession) is no longer as likely¹. Investors anxiously received mixed corporate earnings.

In fact, earnings contributed to some selling in equities, especially megacap tech, towards the end of the month and into the first two trading sessions in August. All the while, value stocks and small-caps (companies with smaller market capitalization) fared quite well in July. Overall, here was the tale of the tape for the month of July: The S&P 500 increased by 1.13%², the NASDAQ 100 fell by 1.50%³, and the Dow Jones Industrial Average rose by 4.41%⁴.

DIVERGENCE FEATURED IN JULY

For an extended period of time, the market narrative has been centered around AI and megacap tech, with names like NVIDIA and META powering major market indexes higher. Well, narratives do change in the financial markets; the shift towards higher dividend-paying blue-chip value stocks and even under loved small-caps came into play as July progressed. But there was nowhere to hide once August got moving, with selling coming in across the board. More on that in a minute!

BE DIVERSIFIED

Early August developments reinforced why a diversified portfolio — having an equity and fixed income portfolio properly constructed based on risk tolerance and other factors — is a must. And while we all know that bonds are not nearly as trendy as a NVIDIA that split 10:1⁵ back in June, it is prudence that makes the bacon for long-term investors. Markets do not go up or down in a straight line, and diversification helps long-term investors weather storms.

EARNINGS INTERPRETATIONS

It’s a busy earnings season, and there has been no shortage of earnings and overall market volatility as of late. Many companies have shown mixed earnings, with some corporations missing the mark on top-line and bottom-line results. Technology stocks were sold heavily at the end of July and into the very beginning of August. We are beyond the halfway point in the earnings season now, and we will see what the rest of it brings, with many tech giant earnings out of the way.

INFLATION COOLING

So, here is the good news: Inflation is cooling. The recent data will factor into the Fed’s September policy meeting, where traders currently see a 100% chance of a rate cut — a 25.5% chance of a 25 basis point cut and a 74.5% chance of a 50 basis point cut.

CONSUMER PRICE INDEX:

Prices are falling, folks. June consumer pricing, released in July, actually fell on a monthly basis, with monthly CPI data showing a 0.1%⁶ monthly decrease from May. This was two ticks lower than the Dow Jones estimate for a 0.1% monthly increase. Great news for the interest rate cut case! Year-over-year, data showed a 3.0% increase — the lowest level in more than three years.

A 3.8% slide in gasoline pricing helped to tame the inflation reading, and even more good news was evident, as shelter and food costs were only 0.2% higher from a month ago. While still sticky⁷, shelter inflation showed some signs of potential cooling, with the lowest monthly jump in three years encouraging interest rate-cutting hopeful bulls.

PRODUCER PRICE INDEX:

After the soft CPI print, we got the June Producer Price Index (PPI), which ran hotter than estimates. Data showed wholesale pricing rose 0.2% in June⁸, higher than the 0.1% Dow Jones estimate. Looking at yearly data, wholesale data for June increased by 2.6%. So, while consumer pricing was lower, the wholesale pricing data was a bit warm — no inflation celebrations just yet! Services pricing contributed to the rise in overall producer pricing, showing a 0.6% monthly gain that accounted for around three-quarters of the overall wholesale pricing gain.

JULY FED MEETING

On the last day of July, the Federal Reserve (Fed) left rates unchanged as expected, keeping the federal funds rate at 5.25% – 5.50%.

The Fed statement included⁹ this note, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have moderated, and the unemployment rate has moved up but remains low. Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.”

MARKET REACTION

The Fed decision day on 07/31 stimulated investors to bid equities higher as optimism grew surrounding rate cuts to come. Earnings from Meta after the bell on the same day helped to keep a bid under major stock indexes.

However, the buying enthusiasm was short-lived, as August began the next day. It was a volatile week on Wall Street, with the Fed in the rear view mirror and investors reacting to the next morning’s unemployment data, showing the highest level since October 2021.

LABOR MARKET

On the note of softer economic data, let’s dig into the July labor market data release. The month’s labor market data missed the mark in a big way, triggering selling across major stock indexes and lower Treasury yields. Overall, 114,000 jobs were created¹⁰ versus Dow Jones estimates for 185,000.

This result was a big miss, especially given the earnings anxiety investors were coping with heading into the jobs number. However, it did cement the odds for a rate cut to come — this is what the market wanted for so long, anyway!

Moving forward, we’ll see how the market further digests the weaker employment data.

PUTTING IT TOGETHER

Market narratives can change on a dime. July showed divergence in major stock indexes, with investor appetite shifting towards value stocks and under loved small-caps versus megacap tech, which could be interpreted as a shift in narrative and sentiment. Economic data is also showing signs of slowing, which is exactly what the Fed has wanted to see to deliver beloved rate cuts. But now that we have the signs of such cooling, volatility returned as selling accelerated in the first two trading sessions in August.

WHAT TO DO?

After heavy selling to start August, it’s important to remember that volatility is always going to present itself in these markets. Remembering the long-term plan when volatility spikes is essential. Nobody knows how long this new narrative will last, but a diversified portfolio is a helpful way for long-term investors to weather volatility storms.

With that overview noted, as more developments occur, we will keep you apprised of them. As always, if you would like to discuss the current market outlook or explore investment strategies based on your objectives, please feel free to contact me.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:
1. Business Insider, August 2, 2024
2.   Advisor Perspectives, July 31, 2024
3.   NASDAQ, July 2024
4.   Morning Star, July 31, 2024
5.   NASDAQ, July 11, 2024
6.   CNBC, July 11, 2024
7.   CNBC, July 11, 2024
8.   CNBC, July 12, 2024
9.   Federal Reserve, July 31, 2024
10. CNBC, August 2, 2024

Quarter 2 Review

Written by support@seostats.com on July 16, 2024. Posted in Newsroom.

This quarters recap: Inflation cools, eyes on Fed

Presented by The PensionmarkMeridien Team, July 18, 2024

As we enter the second half of 2024, now is the perfect time to review the last quarter.

Overall, bulls continued to run during the second quarter of 2024 as several major stock indexes broke out of recent trading ranges to the upside.

Tallying the quarter, the S&P 500 increased by approximately 3.90%¹, the Nasdaq Composite rose by close to 8.1%², and the Dow Jones Industrial Average decreased by nearly 1.7%³.

ECONOMY

Rewind to the beginning of the year, and the talk of the town was as many as six rate cuts to come this year. Remember that? Well, courtesy of sticky inflation (which has recently shown early signs of potentially softening), the narrative has changed significantly since then.

Current expectations are for one rate cut in 2024, with the Fed’s ability to cut near the presidential election in question.

INFLATION

The year-over-year Consumer Price Index inflation rate declined in Q2, with the last CPI reading of the quarter showing consumer pricing cooling slightly month-over-month in May and year-over-year inflation running at 3.3%. It is too early to say if the trend will continue, as many market bulls desire.

Core CPI (which removes more volatile food and energy from the metric) dropped to a three-year low of 3.4% in May, potentially bolstering the case for rate cuts down the line. This metric illustrates just how much the necessities of food and energy contribute to the inflationary pressures here in America.

U.S. equities loved seeing inflation metrics tick lower throughout the second quarter, and the S&P 500 continued to make fresh all-time highs.

LABOR MARKET

Labor markets remained mostly steady to higher throughout Q2, with payroll gains (206,000 in June, 272,000 in May, 175,000 in April) in each month and June and May data beating analyst consensus expectations.

For June, the unemployment rate rose to 4.1%, higher than the estimated 4.0% and the highest level since November 2021. The unemployment rate has inched higher each month for the past three months, potential signs that the Fed’s rate hike crusade has dampened the U.S. economy. You wouldn’t know it by looking at the S&P 500!

QUARTERLY FED EXPECTATIONS

The second quarter featured two Federal Reserve (Fed) policy meetings. The Fed left rates unchanged both times, in line with market expectations. The result is a current target overnight lending rate of 5 – 5.25%.

More importantly, the Fed has set expectations that it will cut rates only once in 2024.

In the third quarter, there will be two Fed meetings: July 31st and September 18th. As of early July, markets were pricing a 93.3% probability of no rate cut in July and a 70.8% probability of a 25-basis-point cut in September, per the CME FedWatch Tool⁴.

PRE-ELECTION RATE CUT DEBATE

Even with a 70.8% probability of a Fed rate cut at the September meeting, much controversy surrounds such a cut, as some market participants argue that a cut could bolster the economy and show potential favoritism to the incumbent. This will likely remain a topic of discussion as the time remaining until Election Day ticks down.

TREASURIES

Courtesy of slowing inflation data and Fed rate cut expectations, Treasury yields fell in the second quarter by more than 30 basis points from their April peak, ending the quarter near 4.37%.

As a result, holders of bonds have seen some well-deserved price appreciation since April. The Morningstar Core Bond Index gained 0.17%⁵ for Q2, and high-yield bonds tacked on 1.07% for the quarter, with the longer end of the curve lagging the shorter-term counterparts.

GENERATIONAL OPPORTUNITY IN BONDS?

It has been a rough patch for bond investors, to say the least, but there is hope!

Is it so bad that it is good? Some experts say yes. It has been 46 months since the bond market made an all-time high.

Looking at the Bloomberg US Aggregate Bond Index’s largest drawdown periods from 1976-2024, we can see that this drawdown has reached extreme levels. Should inflation continue to decelerate or decrease, it could be a time when smart money looks to bonds, given the value proposition.

Not as trendy as AI-fueled stocks, bonds do stand the test of time, and there is ample math that supports these fixed-income assets. Some food for thought entering the third quarter!

FORGOTTEN YIELD CURVE INVERSION

The longest yield curve inversion in U.S. history passed the two-year mark on July 7th. Seemingly forgotten as of late, the abnormal phenomenon has historically portended economic contraction or recession, but those who have banked on that thus far have missed a large rally in equities.

It is election season, so anything is possible moving forward.

WALL STREET WISDOM DEBUNKED

The classic Wall Street adage of “Sell in May and Go Away” did not transpire in the second quarter — for the second year in a row!

That’s right. Despite the higher interest rate environment, an inverted yield curve, and seasonality, the S&P 500 was positive for two out of three months in the second quarter. After declining by 4.16% in April, the S&P 500 added 4.80% in May and 3.47% in June, a solid quarter⁶ for the broad market average.

Tech and artificial intelligence (AI) continue to outperform the broader market, and AI-fueled gains were a prevailing narrative once again in the second quarter.

TECHNOLOGY STRENGTH, MATERIALS & INDUSTRIALS LAG IN Q2

On the subject of AI and tech, below is the overall performance of the technology sector in the second quarter, along with other popular stock sectors and how they fared in Q2 2024.

Technology: +11.40% in Q2 2024.
Basic Materials: -5.88% in Q2 2024.
Communication Services: +9.16% in Q2 2024.
Consumer Cyclical: -1.20% in Q2 2024.
Utilities: +4.48% in Q2 2024.
Industrials: -3.41% in Q2 2024.

DIVIDEND STOCKS LAG IN Q3: TURNING POINT AHEAD?

With the ten-year yield near 4.268%⁷ and, of course, the two-year yield higher at around 4.624%⁸, it is not rocket science why blue-chip dividend-paying stocks have lagged as their trendier tech and AI counterparts have caught massive inflows of investor cash.

But those who have been around the markets for a while know that trends can be temporary, and U.S. giants like Coca-Cola, Disney, and 3M, for example, have stood the test of time and will not be going anywhere anytime soon.

Should interest rates decline, as many expect, dividend-paying stocks could once again come back into favor. We see that defensive sectors like utilities did well in the second quarter — perhaps a sign of things to come.

More food for thought for those seeking further portfolio diversification heading into Q3.

FROM Q2 TO Q3: A SUMMARY

Of course, much attention will continue to be paid to inflation data and Fedspeak. The Fed has broadcast its intentions for one rate cut in 2024, with the CME FedWatch Tool showing current expectations for one in September. The presidential election later this year adds an element of uncertainty to trying to “time” an interest rate cut.

But, putting those two things aside, portfolio diversification and a long-term focus have been the ticket for ages. Some active participants may seek to look outside of tech and AI in Q3 to reduce portfolio volatility, be first in line to some dividend-paying blue chips, and perhaps find happiness in the beaten-up bonds/fixed-income products.

Diversification is the ticket to being a successful long-term investor; timing the market is very difficult, and diversification is much easier. Moreover, remaining focused on the long term allows an investor to avoid getting caught up in quickly changing narratives that could trigger emotional decisions.

With that overview noted, if Q2 market developments are on your mind or if there is anything else we can help with please email or call us at the phone number of email address below.

The PensionmarkMeridien Team may be reached at 866-871-9963 or
meridienteam@pensionmark.com

Please consult your financial professional for additional information.

Citations:

1) Statmuse, 2024
2) Statmuse, 2024
3) Statmuse, 2024
4) CME Group, July 12, 2024
5) MorningStar, July 1, 2024
6) YCharts June 2024
7) Trading View July 8, 2024
8) Trading View, July 8, 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).

Monthly Economic Update: July

Written by support@seostats.com on July 16, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: June a boon for U.S. equities

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

Image of Blue quotation mark with white quotation marks inside

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

Please consult your financial professional for additional information.

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

Monthly Economic Update: June

Written by support@seostats.com on June 7, 2024. Posted in Monthly Newsletter, Newsroom.

In this month’s recap: S&P 500 has best May since 2009

Presented by The PensionmarkMeridien Team, June 10, 2024

U.S. MARKETS

Stock index investors were in command throughout May as the major stock indexes resumed their rallies after consolidating in April.

With the major U.S. equity market indexes resuming runs that began back in November, now is the perfect time to inform you about the latest developments over the course of last month. Below is the latest.

S&P 500: RALLY RESUMPTION

The broadest measure of the U.S. economy clawed back all of the consolidation from April and closed at a fresh monthly closing high¹ in May, marking six out of the last seven months in the green¹. Overall, the S&P 500 had its best May since 2009. Long-term investors will take that to the bank!

For the month of May, the S&P 500 added 4.80%², the NASDAQ 100 tacked on 6.28%³, and the Dow Jones Industrial Average was higher by 2.30%⁴.

TECH LEADS S&P 500

Tech led in May, with Microsoft, Apple, Nvidia, Alphabet, Amazon, and Meta accounting for 76%⁵ of the index’s total gains of the month.

Specific strength was seen in information technology towards the end of the month. Overall, the information technology sector showed investors a very solid earnings season, as earnings growth was the third highest among the 11 S&P 500 sectors.

The S&P 500 information technology sector is led by chip giant Nvidia Corp, Broadcom, Fair Isaac and Company, Super Micro Computer, and other tech powerhouses.

FED MEETING, REACTION, & OUTLOOK

The Federal Reserve kept the federal funds rate unchanged at 5.25% – 5.50% during the May 1st meeting, as expected.

The Fed statement said⁶, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

As traders and money managers digested the May 1st mood of the Fed, the S&P 500 was slightly lower at the day’s close⁷. But markets like catalysts, and the Fed meeting turned out to be the low for the S&P 500 for the month.

Powell also hinted that a rate hike would not be the next move from the central bank. Markets liked hearing that! But what would the tone of the Fed and investors be as the month progressed?

QUOTE OF THE MONTH

Never apologize for burning too brightly or collapsing into yourself every night. That is how galaxies are made.

—Tyler Kent White

EARNINGS SURPRISES

After the Fed meeting catalyzed a May 1st low in the S&P 500 for the month, attention shifted back to Q1 earnings season — and for good reason.

As of May 31st, with 98% of S&P 500 companies reporting earnings results 78% of S&P 500 companies have reported a positive earnings per share (EPS) surprise⁸, and 61% of S&P 500 companies have reported a positive revenue surprise.

First quarter S&P 500 earnings growth was heavily concentrated among five names: NVIDIA, Alphabet, Amazon.com, Meta Platforms, and Microsoft.

The solid Q1 earnings season provided a boost to the overall backdrop in equities as markets battle continued inflation and elevated interest rates.

CONSUMER MOODS

According to the University of Michigan Surveys of Consumers, inflation concerns have caught up with consumers⁹.

The most recent survey indicated that consumer sentiment dropped by about 13%⁹ in May compared to April, following three months of minimal change.

The result may have been fully expected by many, as inflation continues to be sticky and affects Americans.

But, later in the month, the next set of consumer tracking data, showing consumer confidence, told a different story. The data, closely watched after the previous sour consumer number, showed consumer confidence improving for the first time in four months.

The index increased to 102.0 this month from April’s upwardly revised 97.5, surpassing the forecast of 96.0.

It seems we are seeing some mixed messaging on the consumer.

MIXED INFLATION DATA, MARKETS CHEER

Consumer Price Index (CPI):

Speaking of the consumer, all eyes were peeled on the heavily anticipated monthly CPI data.

Consumer inflation in April eased, with the monthly CPI data showing a 0.3%¹⁰ increase from March, slightly lower than the 0.4% Dow Jones estimate. Year-over-year, data revealed a 3.4% increase, in line with estimates.

Core CPI (which excludes more volatile food and energy prices) was very encouraging, showing a year-over-year 3.6% increase, the lowest reading since April 2021. It’s safe to say that market bulls loved this aspect of the report!

The markets responded positively to the consumer inflation data, with the S&P 500 reaching a record-high close¹¹ on the same day. What more could we ask for? Treasury yields also traded lower throughout the day after the data release.

Producer Price Index (PPI):

The day before CPI data was released, April PPI data showed wholesale pricing rose by 0.5%¹² in April, surpassing the 0.2% estimate from Dow Jones. Yearly data revealed a 2.2% increase, marking the largest gain in a year.

Similar to CPI, the rise in overall producer pricing was influenced by services pricing, which saw a 0.6% monthly gain and accounted for about three-quarters of the overall wholesale pricing increase.

Core PPI, which excludes volatile food and energy, also rose by 0.5%, exceeding the estimated 0.2% increase.

Following the data release, stock index futures remained nearly flat, causing some uneasiness in anticipation of the next day’s CPI data. However, stocks eventually rose on the day, setting the stage for the CPI report the following day, which ultimately met the expectations of equity market bulls.

Personal Consumption Expenditures (PCE):

Rounding out May’s inflation data releases, the freshest piece of inflation data was delivered on the final trading day of May in the form of Core PCE.

The Fed’s favorite inflation gauge cooled in April, with Core Personal Consumption Expenditures showing a rise of 0.2% in April, versus estimates of 0.3%. This is what folks wanted to see. The S&P 500 rallied heavily towards the end of the final trading day of May.

STRONG LABOR MARKET DATA

The April employment data, released on May 3rd, showed an increase of 175,000 payrolls for the month, falling short of the estimated 240,000. Surprisingly, this was seen as good news, as the first nonfarm payrolls “miss” since November 2023 could strengthen the case for a potential cut in interest rates.

This “bad news is good news” report gave stock market bulls reasons to be optimistic, as there was hope for softer upcoming inflation data. Later in the month, some of those hopes were realized.

The unemployment rate increased slightly to 3.9% from 3.8% in March.

FED & THE FUTURE

The latest data to close May showed a 99.9% probability of the Fed leaving rates unchanged at the June 12th meeting and a 14.5% chance of a rate cut¹³ at the following meeting on July 31st.

The highest probability for a first rate cut surrounds the September 18th meeting, with a 53.9% chance of a rate cut at the end of May.

THE TAKEAWAY

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

Please consult your financial professional for additional information.

Citations:

Trading View, June 1, 2024
Trading View, June 1, 2024
Trading View, June 1, 2024
Trading View, June 1, 2024
Forbes, June 1, 2024
Federal Reserve Bank of New York, May 30, 2024
Trading View, June 1, 2024
Factset, iMay 31, 2024
University of Michigan Survey of Consumers, May 3, 2024
CNBC, May 15, 2024
CNBC, May 15, 2024
CNBC, May 14, 2024
CME Group, June 2024