For the month of June and year-to-date, the NASDAQ finished positive 5.24% for the month and sits +32.74% year-to-date. The S&P 500 was positive 5.43% for the month and 16.38% year-to-date while the Dow gained 4.07% for the month and is positive 3.84% year-to-date. We are glad we didn’t bet the farm on history! Last month we wrote: The June Swoon? Over the last 100 years, the Dow has averaged a gain of 0.44% during June with a positive return half the time. However, over the past 20 years June has been much weaker with an average return of (0.52%), declining about 60% of the time. In terms of average change and consistency of gains, no other month has been weaker. (Source: Bespoke) That just goes to show you, past performance is not indicative of future results.
From a sector analysis – midway through the year Information Technology, Communications Services, and Consumer Discretionary sectors are all positive over 30% while Energy is the lagger running negative about 10%, Utilities and Financials are also lagging, clocking in a negative 7%, and 3.5% respectively. When looking through the Style Glass you will note that in the large-caps growth is positive about 19% while value is positive about 9% while the small caps and mid-caps are eking out gains around 2%.
No matter how you slice it – M1, M2, or M3 the key measures of the supply of money have all been falling lately. Although we aren’t there yet, if money supply remains tight, the Fed’s 2.0% inflation target will ultimately come to pass. We believe that when all is said and done that the economy ends up a little weaker than the Fed expects this year, but inflation stays higher than the Fed thinks. Combined, if we are right, that should keep the Fed on track to raise rates as it recently projected.
Seemingly counterintuitive to the rising rate story, home builders’ confidence edged into positive territory for the first time in 11 months, aided by strong demand, lower inventory, and a recovering supply chain. May’s new home sales rose 21.7%, the most since October 2016, validating their sentiment.
Since we are on the cusp of a Presidential election year, the Fed and Powell better hope the economy cooperates sooner rather than later. If the Fed does anything other than pause during the election year, Powell will be seen as trying to assist one side or the other. If the economy slows too much and we enter recession Powell may have to lower rates to reignite the economy, if inflation remains stubbornly high, then he may have to continue to raise rates to slay the inflation dragon. Either way, he will be used as a political football.
Apple Inc breached the $3 trillion mark for the first time since January 2022 (as measured by shares outstanding multiplied by share price). Compare to the #2 stock, Microsoft which, while rather large, at just over $2.5 trillion, still trails Apple by nearly a half of a trillion dollars.
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