Tag: Markets

Presented by The PensionmarkMeridien Team, November 19, 2024

Major U.S. stock indexes digested monthly inflation data last week, and market participants reacted to comments made by Fed Chair Powell. There was plenty of market-moving action last week, so let’s get to it with a quick update!

Tallying last week, the S&P 500 declined by 2.08%¹, the NASDAQ 100 fell by 3.42%², and the Dow Jones Industrial Average decreased by 2.60%³.

MAJOR U.S. EQUITY INDEXES

It has been quite the post-election rally, and equity markets took a breather last week. After the S&P 500’s biggest five-day rally in a year, major U.S. stock indexes sold off ahead of key monthly inflation data, with rising Treasury yields and a rising U.S. dollar as catalysts.

Federal Reserve Chair Jerome Powell’s comments about the future of interest rate cuts added to last week’s sentiment — more on that in a minute.

Mostly In-Line Inflation Data

According to the most recent metrics released last week, inflation remained mostly unchanged in October but was slightly warmer than the previous month’s reading.

Consumer Price Index data showed a monthly increase of 0.2%⁴ in October, matching consensus expectations. This equaleda 2.6% year-over-year inflation rate, higher than the previous month’s 2.4% reading — so in line, but warm.

Core CPI, which excludes food and energy, also rose in line with expectations, tacking on 0.3% for the month and running at a 3.3% annual pace.

Once again, shelter costs were the primary factor contributing to the monthly rise in inflation, accounting for more than half of the increase. In October, shelter prices rose by 0.4% monthly and saw an annual increase of 4.9%. Despite an otherwise stabilizing inflationary environment, shelter pricing remains high.

Overall, the CPI data could be interpreted as in line with expectations, but with some overall stubbornness, as the data showed an overall rise from 2.4% in September to 2.6% in October.

CPI Market Reaction

Major U.S. stock indexes rose slightly on the morning of the data release, as the report suggested firming up expectations for a 25 basis point rate cut at the December meeting. The odds of such a rate cut moved higher on the data release day to around 82%.

But the mood of the markets would shift the next day, with Powell dampening expectations of a rate-cutting Fed. 

PRODUCER PRICE INDEX (PPI)

Producer pricing (wholesale pricing) showed a rise of 0.2% in September, matching Dow Jones estimates⁵. Similar to CPI, this wholesale inflationary data came in at expectations, but it was still a rise from the previous month’s reading. 

Verdict: Inflation is at expectations, but pockets of warmth are on the minds of many. Later in the day on Thursday last week, major U.S. equity indexes would trade lower —  not as a direct response to PPI, but more due to Fed Chair Powell’s comments below.

FEDWATCH: POWELL COMMENTARY

With market reaction to CPI and PPI in progress, Powell tempered rate-cut hopes during a meeting at a speaking engagement titled “Global Perspectives” hosted by the Federal Reserve Bank of Dallas later in the day Thursday.

Powell’s comments threw some cold water on risk assets and translated to a fading rally across major US stock indexes.

Comments included⁶ that the Fed doesn’t need to be “in a hurry” to lower rates.

While Powell mentioned the economy is still strong, his comments were deemed as hawkish by the market at large, and rate-cut hopes diminished rather significantly.

At the close of last week’s trading, futures traders showed a 61.9% probability of a 25-basis-point cut at the December Fed meeting, according to the CME FedWatch tool⁷.

Gathering consensus elsewhere, opinions are divided, and we will have to see what the Fed does — or says next. We are well aware that the Fed is “data-dependent,” and with inflation persisting and uncertainty surrounding the labor market, we need more data to get a read.

GOVERNMENT BOND YIELDS RISE

As major stock indexes fell last week on hawkish Fed commentary and open-to-interpretation inflation data, government bond yields rose.

Ten-year note yields gained around 12 and a half basis points to end the week near 4.429%⁸, the highest weekly close since June.

Two-year note yields also moved higher, although not as much as the 10-year yield, gaining around 5 basis points, closing the week near 3.584%.

Perhaps recent pricing behavior in government bonds over the last couple of months was predicated upon the Fed getting more hawkish like we saw last week. 

GOLD LOSES LUSTER

Gold bulls have been hibernating since the election after the shiny yellow metal touched all-time highs in the spot market pre-election near $2,790 per troy ounce. Spot gold closed near $2,563 per troy ounce⁹ last week, still higher by a handsome percentage for the year so far.

Reduced political uncertainty surrounding the election outcome and flows into equities could have given gold bulls some room for pause in the short term.

THE TAKEAWAY

We just had a monster post-election rally featuring the S&P 500’s best five-day stretch in a year. CPI and PPI data are constructive in that the inflation battle has been fruitful and productive, but there is room for interpretation on both sides of the argument in the eyes of the market. 

The Fed sounded hawkish, and rate cut probabilities dwindling somewhat last week didn’t leave market bulls with much to hang onto temporarily. But we have come far rather quickly. Profit-taking is bound to occur for shorter-term traders. For long-term investors, however, the beat goes on until the next narrative takes form. 

Let’s also be mindful that the interest rate markets have been telling us something for the last couple of months, as rates have risen in the open market. Even though the recent narrative has been for more rate cuts to come, the move higher in rates has been stubborn. So, an adjustment in market pricing for many assets was bound to occur. Let’s see what we get next.

As always, if there is anything on your mind regarding the markets and the latest developments, shoot us an email or give us a call! We are always here as a resource for you.

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

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.)

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.

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, November 16, 2024
2.            Trading View, November 16, 2024
3.            Trading View, November 16, 2024
4.            CNBC, November 13, 2024
5.            CNBC, September 12, 2024
6.            CNBC, November 14, 2024
7.            CME Group, November 2024
8.            Trading View, November 16, 2024
9.            Trading View, November 16, 2024

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.

Presented by The PensionmarkMeridien Team, October 16, 2024

All eyes were focused on Consumer Price Index (CPI) data released last Thursday, as traders wanted to see the next chapter of the inflation narrative. The second trading week of (the usually volatile) October is in the books, and it was a good one for major stock indexes.

Summarizing last week’s trading, the large-cap S&P 500 gained 1.11%¹, the NASDAQ 100 increased by 1.18%², and the Dow Jones Industrial Average increased by 1.21%³.

MIXED INFLATION DATA 

Data showed a slight warming in inflation on the consumer level, with a monthly increase of 0.2% — a tick higher than estimates. The month brought a 2.5% year-over-year inflation rate, which was the lowest reading since February 2021 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%. The annual core CPI rate was 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 rise⁴ in the all-important consumer inflation metric.

JANKY INFLATION DATA?

If you are a fan of financial buzzwords, this one’s for you. Let’s add “janky” to the list!

In an interview last week, Atlanta Federal Reserve President Raphael Bostic mentioned that it is important to see if individual data points form a larger pattern or if there are just some “janky” data points⁵ (in reference to the September CPI data and jobs reports coming in hotter than expected).

Bostic, a voting member of the Federal Open Market Committee (FOMC), mentioned that the choppiness in recent data ”is along the lines of maybe we should take a pause in November” when referring to rate cuts.

So far, traders interpreted the warmer-than-expected CPI data in a “janky” way as well, with traders increasing their bets on a rate cut. Investors may be banking on the Fed continuing with its plans to continue to cut rates, despite inflation showing some quick signs of inching higher. Since the Fed just started with rate cuts about three weeks ago, the consensus may be for the Fed to stay the course and not deviate based on a few data points.

It is a dynamic time now. It’s October, data is up for continued interpretation, and the election is right around the corner.

CPI MARKET REACTION

Major U.S. stock index futures initially sold off upon the data release⁶ at 8:30 a.m. ET and traded lower for about half of the New York trading session, as the report indicated a run-of-the-mill 25-basis-point cut at the November meeting. However, the S&P 500 held its lows made upon the data release and closed the day very close to where it was before the CPI data release.

It was an interesting reaction to the data, as market participants figured out how a higher tick inflation print could affect the Fed at the next meeting. So, after an initial stumble reaction to the data and digestion, the S&P 500 found its footing on the day of the data release.

PRODUCER PRICE INDEX (PPI) DATA

The day after CPI was released, wholesale pricing showed no change in inflation, coming in below Dow Jones estimates⁷ for a 0.1% monthly rise. Major stock indexes reacted positively to the data and continued their upward journey, having a positive day to close out last week.

The most recent data for September puts the annual PPI rate at 1.8% and is constructive in the inflation easing theme. 

THIS WEEK

October is in full swing, and the major U.S. equity markets have done well so far, as we enter the meat of the month. With CPI and PPI out of the way for October — and data showing a slight uptick in consumer pricing combined with flat producer pricing — attention this week turns to retail sales data in an otherwise quiet economic data release week. 

Perhaps more time will need to pass for the markets to digest the recent inflation data.

As always, if there is anything on your mind regarding the markets or your long-term investing strategy, please feel free to reach out to us.

We are always here as a resource for you. 

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

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.)

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.

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, October 12, 2024
2.            Trading View, October 12, 2024
3.            Trading View, October 12, 2024
4.            CNBC, October 10, 2024
5.            CNBC, October 10, 2024
6.            Trading View, October 13, 2024
7.            CNBC, September 12, 2024

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.

Presented by The PensionmarkMeridien Team, September 24, 2024

Financial markets welcomed the new lower benchmark overnight lending rate set by the Fed, with all-time-closing highs in the Dow and S&P 500 achieved.

Tallying the week, the S&P 500 increased by 1.36%¹, a weekly closing high; the NASDAQ 100 rose by 1.42%², and the Dow Jones Industrial Average rose by 1.62%³, also a record weekly closing high.

50-BASIS-POINT RATE CUT

Ask, and you shall receive (eventually)! Markets have wanted a rate cut for quite a long time now, and it was finally delivered last week. And it was not just a run-of-the-mill 25 basis points either. The Federal Open Market Committee delivered a supersized 50-basis-point rate cut in an effort to stimulate the labor market and continue economic expansion.

In an action that suggests inflation is in the rear-view mirror, Federal Reserve Chair Jerome Powell started the first monetary easing campaign in four years with a bang.

In the accompanying Fed Meeting press release, the Federal Reserve said⁴: “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

Powell created a brand new financial buzzword in the process: “Recalibration.”

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DATE	TIME	LOCATION	TOPIC
Thursday, September 26	10 AM – 10:30 AM	Webinar	Retirement Income Solutions

RECALIBRATION MANIFESTATION

Many of us remember financial buzzwords of the past, like inflation being “transitory,” which was not the case.

But a new word was born last week during the post-Fed rate decision press conference: recalibration⁵.

The concept behind this sure-to-hear-more-about word is simple, and it took market participants a day to fully interpret and digest. It could be interpreted as a message that the easing cycle (rate-cutting campaign) is not about the economy being in recession, but rather that it is designed to continue fueling the economic expansion.

Moreover, the Fed’s action was deemed appropriate for shoring up the labor market.

These developments mark some different messaging and different actions than history would suggest. Rate cutting near stock market all-time highs is not something that would seem probable based on traditional economics, but here we are.

RATE CUT MARKET REACTION

Markets loved the Fed rate cut action, with the S&P 500 reaching all-time highs on the day of the announcement but fading late in the day⁶.

However, in a” delayed fuse rally fashion” during the next trading session, the S&P 500 and Dow Jones Industrial Average reached fresh all-time daily closing highs.⁷

The most cited reason for the soaring asset values on the day after the Fed rate decision was Federal Reserve Chair Jerome Powell’s “recalibration” commentary.

The consensus at the time was one of rate cuts shoring up the labor market and continuing the economic expansion, versus the need to stimulate the economy as a whole due to recession. This equates to a soft-landing consensus being achieved, at least for now!

Let’s remember that the S&P 500 closed at a weekly all-time closing high.

TREASURY YIELDS / NORMALIZATION CONTINUES

The 2/10 Treasury yield curve normalization continued last week, with the 10-year yield closing the week yielding near 3.727%⁸, and the 2-year Treasury yield closing near 3.597%⁹.

So, the spread between 10s and 2s closed the week near 14 basis points¹⁰, its third consecutive week of positive yield normalization, or “uninversion.”

RETAIL SALES TOP ESTIMATES

August retail sales data also fueled investor optimism, with data showing a rise of 0.1% in August, compared to expectations for a 0.2% decline.

Some commentary indicated that the stronger-than-expected retail sales data combined with falling energy prices. Consumers continue to spend freely despite the slowing in the labor market. It’s unclear if this is a smart move. Credit card balances have increased explosively throughout the recent inflationary period, and many Americans are dealing with high interest rate balances.

But this is America, and we are good at spending! Hopefully, the rate cut from the Fed last week will reduce overall interest payments to those with variable APRs in the coming months.

THIS WEEK

The economic news continues this week, with consumer confidence data, final lGDP data, Chair Powell’s comments at the U.S. Treasury Market Conference on Thursday, and Core Personal Consumption Expenditures data, the Fed’s preferred inflation metric on Friday. 

Meanwhile, markets will continue to digest the recent interpretation of the Fed 50-basis-point rate cut. The more lenient lending environment should stimulate lending and generate additional activity in the financial markets.

As always, if you have any questions or would like to discuss your portfolio, do not hesitate to reach out either by email or phone.

We are always here as a resource for you.

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

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.)

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.

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, September 21, 2024
2.            Trading View, September 21, 2024
3.            Trading View, September 21, 2024
4.            Federal Reserve, September 18, 2024
5.            CNBC, September 19, 2024
6.            Forbes, September 19 2024
7.            Yahoo Finance, September 22, 2024
8.            Trading View, September 22, 2024
9.            Trading View, September 22, 2024
10.         Trading View, September 22, 2024

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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.

Presented by The PensionmarkMeridien Team, September 17, 2024

Major U.S. stock indexes digested continually tame inflation data last week, and market bulls were on parade as participants look forward to this week’s Fed meeting. In summary, last week the S&P 500 added 4.02%¹, the NASDAQ 100 increased by 5.93%², and the Dow Jones Industrial Average rose by 2.60%³.

SOFTENING INFLATION DATA

According to the most recent metrics released last week, inflation continued to cool in August. The grandfather of inflation data, CPI,showed continued cooling in inflation on the consumer level. Data for August showed a monthly increase of 0.2%, which equaled a 2.5%  year-over-year inflation rate– the lowest since early 2021⁴.

Core CPI, which includes food and energy, rose a tick above expectations, tacking on 0.3% for the month versus expectations for 0.2%. The main culprit for the rise in the core was Shelter costs–accounting for 70% of the core increase⁴–seeing monthly gains of 0.5% and an annualized increase of 5.2%. Used vehicles declined by 1%, while apparel pricing rose by 0.3%. And here we go again–egg prices rose 4.8% on the month.

CPI MARKET REACTION

Major U.S. stock indexes initially sold off upon the data release and fell throughout the day, as the report suggested to firm up expectations for a run-of-the-mill 25 basis point cut this Wednesday. Typically welcome news, the Dow briefly fell 743 points⁵ before mounting its biggest intraday comeback in almost two years.

Traders were busy handicapping hard versus soft landing probabilities⁵ and figuring out whether the Fed’s timing is right. Following the release of CPI data last Wednesday, traders priced in greater than 100 basis points of rate cuts over the final three Fed meetings this year. Positioning showed a 50-bp cut expected in November or December, with a 50% chance of seeing one this week⁶.

The day after PPI data was released, Producer Pricing (wholesale pricing) showed a rise of 0.2% in August, matching Dow Jones estimates⁷. Major stock indexes came into the data higher from the previous day’s CPI print and continued their upward journey,  having another positive day.

PENSIONMARKMERIDIEN EVENT(S)

We would love to have you join us one of the event(s) below. To get more information or to register click the topic, which is highlighted and underlined in blue. Are you unable to join us for the planned event? Register, or email me, and we can send you the replay when it is available.

DATE	TIME	LOCATION	TOPIC
Wednesday, September 18	12 PM – 12:30 PM	Webinar	Plan Sponsor Survey
Thursday, September 26	10 AM – 10:30 AM	Webinar	Retirement Income Solutions

FEDWATCH

With market reaction to CPI and PPI last week being equity-market-supportive, last week painted a Fed-friendly picture. As of the close of last week’s trading, futures traders show a dead heat between a 25 basis point cut and a 50 basis point cut at this Wednesday’s Fed meeting, according to the CME FedWatch tool⁶.

Gathering consensus elsewhere, opinions are divided; we will have to see what the Fed does, and some may think a 25 BP cut leaves something to be desired as far as timing. A 50 bp cut would certainly loosen up lending and spur activity.

GOVERNMENT BOND YIELDS DECLINE

As major stock indexes rose last week, government bond yields fell, indicating expectations for lower Fed overnight rates and a risk-on attitude. Ten-year note yields lost around six basis points to end the week near 3.651%⁸. Two-year notes lost around 6.6 basis points, closing the week near 3.584%⁹. With tens out yielding twos again this week, the 2/10 yield curve “uninversion” or normalization continued for a second week¹⁰.

THE WEEK AHEAD

We find ourselves further into election season as the markets eagerly anticipate rate cuts starting this week. Using CME FedWatch Tool as an indicator, opinions are split down the middle–something we are not used to being this close to a Fed meeting date.

CPI and PPI data are constructive in that the inflation battle has been fruitful and productive, but it is not quite over yet. However, last week’s data showed that CPI is getting closer and closer to the Fed’s 2% annual target annual inflation rate. 

With all of this said, if there is anything on your mind regarding the markets and the latest developments, contact us at the phone number or email address below.

We are here as a resource for you whenever you need us.

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

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.)

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.

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, September 14, 2024
2.            Trading View, September 14, 2024
3.            Trading View, September 14, 2024
4.            CNBC, September 11, 2024
5.            MarketWatch, September 11, 2024
6.            CME Group, September 2024
7.            CNBC, September 12, 2024
8.            Trading View, September 14, 2024
9.            Trading View, September 14, 2024
10.         Trading View, September 14, 2024

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.

Presented by The PensionmarkMeridien Team, August 27, 2024

Major U.S. stock market indexes rose last week, as the S&P 500 increased by 1.45%¹, the NASDAQ 100 traded higher by 1.09%², and the Dow Jones Industrial Average rose by 1.27%³.

FED MINUTES: RATE CUT IN FOCUS

The most recent Fed meeting minutes contributed to last week’s broader gains in major U.S. stock market equity indexes. Notes from the July meeting showed that officials are poised to cut interest rates, plan to move forward with a cut in September, and even considered one at the previous meeting.

While all officials voted to hold rates steady at the July meeting, an unspecified number of them were inclined to start easing at the July meeting rather than waiting until September. The July meeting minutes indicated that a rate cut is likely to occur in September. With the September meeting about a month away, we will see what happens next.

JACKSON HOLE SYMPOSIUM

Markets like clarity and certainty, so all eyes were on the Jackson Hole Symposium last Friday afternoon to see if Federal Reserve Chair Jerome Powell could add some color or virtually confirm the Fed’s potential direction for the rest of this year.

Powell had some choice words: “The time has come⁴” for rate cuts. Policymakers do not want to see the job market cool any further.

Powell is remembered for his commentary at the 2022 Jackson Hole Symposium, where he warned of economic pain. “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” he said during the 2022 meeting.

POTENTIAL MARKET RESPONSE

Major U.S. stock indexes responded to those 2022 comments to the downside⁵ after the September meeting. Buyers then emerged in October 2022. But this year’s meeting featured a different takeaway — one of inflation-busting success and impending rate cuts.

“My confidence has grown that inflation is on a sustainable path back to 2%,” Powell said in his keynote speech at the Fed’s annual economic conference in Jackson Hole. This tone was positively interpreted by markets at the close of last week.

U.S. DOLLAR DECLINES LAST WEEK

In a mostly “risk-on” style of trading last week, the U.S. dollar fell against other major currencies, contributing to gains in dollar-denominated assets, including gold and bitcoin.

Overall: 

• The spot price of gold rose by 4.35%⁶ last week.
• Spot bitcoin (Coinbase) rose by 9.72%⁷ last week (as of Saturday afternoon). Spot bitcoin trades 24/7 on several different exchanges, with ETFs now available for spot bitcoin.

So, it was one of those weeks where declining bond yields and a declining dollar positively impacted many risk assets.

By nature, many traders, however, are looking for a bottoming dollar via the US Dollar Index (DXY), as the index value’s decline approaches the key psychological level of 100.00⁸. The DXY measures the strength of the US dollar against a basket of six other currencies.

GOVERNMENT BOND YIELDS FALL

Markets like certainty, and if they can’t have that, they look to bond yields for clues about the direction of the U.S. economy. Notably, Treasury yields have been trending lower since April, even though the seemingly forever-anticipated rate cuts haven’t occurred yet. 

Let’s remember that markets, in general, are forward-looking price discovery mechanisms. Perhaps the bond market has been trying to tell us something or potentially confirm the Fed’s course for quite some time.

EXISTING HOME SALES TICK HIGHER

For the first time in five months, existing home sales data for July showed gains in closed transactions. At an annualized rate of 3.95 million units, gains were a tad better than expectations for 3.94 million units. That’s a 1.3% rise from June. Year-over-year, the number of closed sales was 2.5% lower, however.

Declining mortgage rates over the last month or two played a role in the pickup in transactions. All-cash closed transactions made up 27% of closings in July versus 26% last year. Nationwide median sales prices, however, did not cool, even with an increase in supply. The average closed transaction price was $442,600 in July, 4.2% higher than a year ago. Doesn’t sound right? That’s the national data, and here is the associated methodology⁹. Sales saw the biggest gains in the Northeast and were flat in the Midwest.

PAYROLLS REVISION

Last week, non-farm payrolls were substantially revised (-0.5%) — the largest revision since 2009. The revision measures total non-farm payrolls over the preceding 12-month period. The data comes via an annual benchmark revision by the Bureau of Labor Statistics. That’s 818,000 payrolls cut from the last 12 months (-0.5%). Food for thought!

THE TAKEAWAY

The time has come for rate cuts. Powell said so in the annual Jackson Hole Symposium last week, and the market is eagerly awaiting them. Fed minutes also showed the collective acceptance of rate cuts and the willingness of the Fed to cut rates sooner rather than later. The declining dollar last week could help to spur asset prices in the short-run, yet the U.S. Dollar Index is approaching potential support levels. 

The annual Jackson Hole Symposium indicated an accommodating Fed in general (i.e., a Fed that is ready to cut and a Fed that does not want to see any more decreases in labor markets). The Fed should live in traders’ and investors’ minds this week, yet we are in an election season. 

MOVING FORWARD

For major economic data releases this week, we get consumer confidence, weekly unemployment claims, gross domestic product (GDP) data, and Core Personal Consumption Expenditures (PCE) Price Index — the Fed’s preferred inflation gauge.

As always, we will keep you apprised of the most recent market developments and narratives as they occur.

If you have any questions or needs, do not hesitate to email us or give the office a call. We are always here as a resource for you. 

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

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.)

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

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, August 24, 2024
2.            Trading View, August 24, 2024
3.            Trading View, August 24, 2024
4.            AXIOS, August 23, 2024
5.            Trading View, August 25, 2024
6.            Trading View, August 25, 2024
7.            Trading View, August 25, 2024
8.            Trading View, August 25, 2024
9.            National Association of Realtors, 2024

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

Presented by The PensionmarkMeridien Team, August 20, 2024

After the recent two-week surge in market volatility and fresh inflation data reinforcing a change in tune, now is the perfect time to keep you updated on the latest developments.

Overall, for the week ending 08/16//24, the S&P 500 rose by 3.93%¹, the NASDAQ 100 decreased by 5.38%², and the Dow Jones Industrial Average gained 2.94%³.

INFLATION PICTURE

Consumer Price Index (CPI): Year-Over-Year Decline:
Consumer inflation declined on a yearly basis in July, with the annual inflation rate slowing to 2.9% — the lowest since March 2021³. On a monthly basis, July CPI data increased at a 0.2% rate, in line with expectations. Great fresh news for the interest rate cut case!

Shelter inflation continues to be persistent and increased at a .4% clip⁴ in July, which was responsible for 90% of the all-items inflation increase. Meanwhile, food pricing climbed at a 0.2% rate month over month for July, and energy pricing was flat.

July Core CPI(which removes more volatile food and energy from the metric) also cooled, coming in at expectations with a yearly 3.2% gain. On a monthly unrounded basis, we saw a .02% increase in line with expectations. Stock market bulls loved this aspect of things, especially pertaining to future rate cuts!

Producer Price Index (PPI): Cooling:
Ahead of the encouraging CPI print on Wednesday, Tuesday gave us the July Producer Price Index, which ran cooler than estimates. Data showed wholesale pricing rose 0.1% in July⁵, lower than the 0.2% Dow Jones estimate.

Perhaps even more encouraging for market bulls was the yearly wholesale inflation decrease, which showed a drop to 2.2% from June’s annual reading level of 2.7%. The lower data point ahead of CPI excited market bulls, heading into the more important CPI number the next day.

What fantastic inflation data for the markets, especially after experiencing a sharp spat in volatility in the previous two weeks. The broad stock market indexes are resilient assets and are even more resilient with encouraging labor market data like this.

TREASURY YIELDS FALL

As major stock indexes rose last week on lower inflation data, Treasury yields fell. Ten-year note yields shed about 4.8 basis points last week, finishing the week near 3.893%⁶.

Bonds were bought by some folks, in anticipation of lower yields to come. Remember, bond yields and bond prices move in opposite directions.

CONSUMER SENTIMENT BOUNCES

After a five-month dry spell in consumer sentiment, August data gave us signs of a bouncing consumer. Data showed consumers feeling more resilient in August, with the University of Michigan Consumer Sentiment Index reading at 67.8⁷, up from 66.4 in June. This was the highest reading since June and the first uptick in five months.

Considering the data from CPI last week, shelter costs continue to plague consumers, with pricing being notably stubborn. Ideally, shelter prices will lessen in the months to come, which could further fuel a rebound in consumer sentiment. We will continue to monitor sentiment and the narratives that come along with it!

RETAIL SALES RECOVER

Along with the bounce in consumer sentiment, retail sales data also gave bulls more reasons to buy last week. Data for July showed a 1.0% jump⁸ amid expectations for a rise of .03%. So, much better than expected!

Strength was seen in automobile/parts dealers, appliance stores, and food/beverage outlets. Miscellaneous retailers, which saw much strength just a few months ago, saw plunging sales receipts.

GOLD SHINES

Investors that have an allocation to the precious yellow metal were rewarded last week as spot gold prices pushed through $2,500 per ounce for the first time in history, closing the week near $2,508⁹ per troy ounce.

Given expectations for an easing Fed and a recent softening dollar, it makes sense that gold pushed higher. Even more impressive, however, is the fact that gold has performed so well throughout the interest rate hiking cycle. 

Global central bank buying has certainly played a role in gold remaining firmly priced for an extended period. 

LET’S ONCE AGAIN REITERATE:

1. It is an election year. Election years historically portend volatility, and we just saw some.
2. “Higher for longer rates” has been the narrative for an extended period. Themes change.
3. CPI data is showing continuing evidence of easing. Rate cuts are more likely.
4. Did I mention it is an election year?

Aside from it being an election year and the memories of 2008, the volatility spat that we just saw was extremely short-lived. Will it return? Well, last week was yet another indication that those who react to short-term market gyrations featuring volatility get left behind. 

For now, the digestion of the most recent inflation data was extremely encouraging, and market participants were pleased to see a CPI and PPI print that further solidified the case for rate cuts to come in the near future.

WEEK AHEAD

This week is more of a quiet one news-wise. However, we do get Federal Reserve meeting minutes from the central bank’s last meeting. In addition, it is the yearly Jackson Hole Symposium, which is often heavily monitored for clues in interest rate policy.

Looking at the CME FedWatch Tool for the upcoming September meeting (about a month away), a rate cut is widely expected. It is just a matter of it being 25 or 50 basis points. But these things can change!

As always, if there is anything on your mind regarding stocks, interest rates, dividends, small caps, or anything else, please feel free to reach out to me.

We can connect to discuss your thoughts.

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

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.)

Advisory services offered by Pensionmark Financial Group. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.
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, August 17, 2024
2.            Trading View, August 17, 2024
3.            Trading View, August 17, 2024
4.            CNBC, August 14, 2024
5.            CNBC, August 13, 2024
6.            Trading View, August 18, 2024
7.            Yahoo Finance, August 16, 2024
8.            CNBC, August 15, 2024
9.            Trading View, August 18, 2024

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

Presented by The PensionmarkMeridien Team, August 16, 2024

Last week was a wild one in the U.S. financial markets. There was plenty of emotion and news moving markets, triggered by an unwinding of the Japanese Yen carry trade. (More on that in a minute.) 

Given that there are questions from a wide spectrum of investors, I thought I would share a special update on last week, as this week is sure to bring market-moving headlines.

U.S STOCKS INDEXES

After making record highs in July, the S&P 500 continued its retreat for the fourth consecutive week — but barely. The broadest measure of the U.S. economy flirted with ending the week in positive territory after being down by 3.00%¹ in last Monday’s trading session.

Overall, for the week ending 08/09/24, the S&P 500 declined by 0.04%², the NASDAQ 100 was actually higher by 0.39%³, and the Dow Jones Industrial Average decreased by 0.60%⁴. 

It was a wild week with the lows in major indexes made on Monday and a grind higher (with volatility) for the remainder of the week.

YEN CARRY TRADE

With volatility spiking last week, the main culprit was the “yen carry trade.” So, here is a basic overview of what a carry trade is and what exactly happened. 

• Carry Trade, Explained: In foreign currency markets (forex), when traders buy one currency, they sell another simultaneously. For an appropriate and timely example, take the USD/JPY – the U.S. dollar versus the Japanese yen. If an investor buys this currency pair, they are buying dollars and selling yen, which has been a popular trade in recent months and years as the Fed has raised rates here at home. This type of trade has moved the dollar higher and the yen lower⁵ over the last few years.
• “Carry” Overview: In Forex, at the end of each business day, a “carry” must be debited or credited from or to a trader. The trader that owns the currency that has the higher interest rate receives a “carry” similar to daily interest, also known as “roll.” Investors who are long (bought) the currency with the higher national interest rate get paid, and the investor who is short (sold) the higher interest rate currency has to pay it.
• What Happened: Long story short, last week, investors that were long the U.S. dollar and short the Japanese yen all headed for the exit ramp at once, with the catalyst being that Japan raised its interest rates from near zero to “around 0.25%.” With higher interest rates in Japan and the outlook for lower rates here in the U.S., the yen carry trade is less attractive.

RIPPLE EFFECTS AT HOME

We saw volatility, as measured by the $VIX index, spike last Monday to levels unseen since COVID in March of 2020, according to Factset.

Traders and market veterans will tell you that the VIX index spiked above 60 in Monday’s premarket trading, ahead of the 9:30 cash open, and that it never actually transacted at that level.⁶

We can see the extreme spike in fear faded rather quickly once last week’s trading got started in cash markets. After spiking above 60, the $VIX settled near 20.37.⁷

So, volatility spiked and quickly dissipated. In fact, the $VIX Index finished in the red last week, losing 14.38%⁸. How about that? The S&P 500 and the $VIX tend to move in opposite directions overall. (Generally speaking, they are quite negatively correlated.) 

Stock valuations and a recent surprise uptick in unemployment here at home surely contributed to the volatility last week, even though they were not direct catalysts.

JAPAN

 As U.S. investor’s nerves began to settle down as last week progressed, many may have thought “Hey, this is a Japan problem.” The Bank of Japan has kept rates near and below zero for an extended period and executed its first rate hike in 17 years.⁹ But keeping the rate around zero for such a long time, especially with inflation running hot worldwide for the last several years, has its repercussions. Inflation is accelerating in Japan, and the rate hike was necessary to keep things in check. Japan’s major stock market index, the Nikkei 225, experienced its worst one-day drop since 1987 as the fallout occurred.

THIS WEEK: CPI & PPI

As markets continue to digest last week’s volatility, this week brings fresh inflation data in the form of Consumer Price Index (CPI) & Producer Price Index (PPI). Barring a surprise in CPI, this week’s price action (movement of stock prices over time) may play the most important role. We will just have to see how the continued digestion of events in Asia plays out, along with market sentiment surrounding the labor market and stock valuations during this election year.

We also get retail sales this week to gauge the consumer, as economists debate the short versus hard landing scenario.

DICTATE WHAT HAPPENS

Volatility comes and goes in markets — and man, did it come and go quickly last week. Let’s remember that the S&P 500 was 24.23% higher in 2023¹⁰ and is currently 12.04% higher so far this year¹¹ (as of market close on 08/09). Corrections or pullbacks are bound to happen. Nobody knows what this week will bring yet, but volatility could persist from last week’s levels, given the rebounding Iran/Israel narrative, Japan factors, CPI data here in the U.S., and other factors.

As a long-term investor, it is wise to think ahead and dictate what happens instead of reacting to it. While an investor can’t dictate the price of assets, they can dictate their reaction to price fluctuations. Responses will vary depending on one’s investment objectives and time horizons, among other factors. But in many cases, no action is needed other than sticking to the existing plan.

Uncertainty tends to reward investors over time, so sticking with a diversified portfolio including bonds can be one great way to attempt to minimize volatility in an investor’s portfolio.

As usual, we will be keeping you apprised of the latest developments. In the meantime, if you have any questions or concerns, do not hesitate to reach out. We are always here as a resource for you!

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

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.)

Advisory services offered by Pensionmark Financial Group. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.
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.            NBC News, August 9, 2024
2.            Trading View, August 11, 2024
3.            Trading View, August 11, 2024
4.            Trading VIew, August 11, 2024
5.            Trading View, August 11, 2024
6.            Bloomberg, August 9, 2024
7.            Trading View, August 11, 2024
8.            Trading View, August 11, 2024
9.            World Economic Forum, March 26, 2024
10.          YChart, 2024
11.          Slick Charts, 2024

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

Presented by The PensionmarkMeridien Team, August 2, 2024

With financial markets pondering recent geopolitical developments and sector rotation out of tech weighing on markets last week, now is the perfect time to reach out and keep you informed.

Tallying the week, the S&P 500 declined by 0.83%¹, the NASDAQ 100 fell by 2.56%², and the Dow Jones Industrial Average rose, ending the week higher by 0.75%³, as sector rotation was once again on display.

U.S STOCKS / SECTOR ROTATION

Stocks traded lower overall in a rather choppy fashion last week, with selling in large-cap tech keeping a lid on the NASDAQ and S&P 500.The shift into industrials, small-caps, and value versus tech and growth unfolded for a third consecutive week. Notably, small-caps and the Russell 2000 have been in the conversation, with the 2000-company small market capitalization stock index making gains last week⁴.

ISRAEL STRIKE

Saturday afternoon, news broke that Hezbollah attacked Israel. Now, Israel is preparing its response, but many senior officials have mentioned that an all-out war is to be avoided. The story is developing, and market participants are bracing for Israel’s response.

GDP SOLID

 As last week developed, investors looked to Thursday’s gross domestic product (GDP) data for confidence in the state of the U.S. economy, and the data was indeed supportive. Data showed that the U.S. economy grew by 2.8%⁵ in the second quarter, and economists predicted a growth rate of 2.1%.The higher-than-expected GDP data was supportive for markets and strengthened the case of futures traders when it comes to rate cuts in September.

“GDP exceeded expectations in the second quarter, restoring faith that the economy is easing into a sustainable level of growth,” America’s Credit Unions Deputy Chief Economist Curt Long said in a statement. “Recent statements from Federal Reserve officials confirm that a rate cut is squarely in view. However, such action is not needed to ward off a recession but is rather a response to the moderation in inflation.”

FEAR INDEX RISES

As major stock indexes traded in a mostly choppy fashion last week, the so-called “fear index” rose to levels not seen since April⁶, as tech led the equity markets lower. Given the backdrop featuring geopolitical factors and some anxiety over earnings, it only makes sense to see a higher level of volatility.

BUSY WEEK – FED & EARNINGS

It’s an action-packed week for the markets, with big tech earnings front and center. On Tuesday, we get Microsoft earnings, Meta on Wednesday, and Apple and Amazon on Thursday. In addition, we got the July Federal Reserve (Fed) meeting yesterday, where the expectations that rates would stay unchanged were accurate.

REFLECTING AND LOOKING AHEAD

As markets look for lower interest rates via the Fed in the not-too-distant future, the focus is on corporate earnings with the tech heavyweights on deck. The fresh possibility of Middle East escalation is on the minds of many as this action-packed Fed week begins.

This week brings us plenty of catalysts: Big tech earnings, other earnings, the Fed meeting, and the big monthly jobs number to end the week. All the while, markets will continue to digest the most recent tamer inflation data and the Middle East concerns.

With that said, if you have any questions about market developments or your portfolio, do not hesitate to reach out. We are here as a resource for you when you need us.

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

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.)

Advisory services offered by Pensionmark Financial Group. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.
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, July 27, 2024
2.            Trading View, July 27, 2024
3.            Trading View, July 27, 2024
4.            Investing, July 29, 2024
5.            CNBC, July 25, 2024
6.            MarketWatch, July 24, 2024

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