Stocks climbed last week as reassuring inflation data boosted investor hopes that the rate-hike cycle was nearing an end amid fresh economic data pointing to continued economic resilience. However, one of our favorite economists we follow, Brian Wesbury of First Trust, throws a cold bucket of water on the notion inflation has been tamed. He makes a very good case for higher rates and an impending recession in the next 12 to 18 months. Both would mean the risk-on attitude in the markets is premature.
The Dow Jones Industrial Average rose 1.25%, while the Standard & Poor’s 500 picked up 2.58%. The Nasdaq Composite index gained 3.25% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.42%.1,2,3
Stock market momentum gathered steam last week, blowing past the 4,300 and 4,400 thresholds in the S&P 500–a remarkable feat considering the time it took to break the 4,200 resistance level.
Optimism was high to begin the week, with expectations that fresh evidence of cooling inflation would provide the Fed room to pause on further rate hikes. The data cooperated as consumer prices rose 4.0% year-over-year (the lowest 12-month number in two years), and producer prices increased 1.1% from a year ago.4
The Fed’s “hawkish pause” briefly unsettled investors, but after some reassessment and aided by healthy economic data, stocks rallied before slipping on Friday as the market digested the week’s gains.
More Rate Hikes to Come?
Federal Reserve officials kept rates steady at last week’s Federal Open Market Committee (FOMC) meeting. However, a majority of committee members indicated at least two more quarter-point rate hikes were likely before year-end.4
Fed Chair Jerome Powell commented that he saw progress in fighting inflation and that no decision was made regarding any future rate increase, saying that members will assess the economic impact of the cumulative rate hikes before the July 25-26 FOMC meeting.5
The Fed raised its 2023 economic growth forecast to 1%, up from its March forecast of 0.4%. The Fed also lowered its unemployment projection to 4.1% from its earlier estimate of 4.5%.6
This Week: Key Economic Data
Tuesday: Housing Starts.
Thursday: Existing Home Sales. Index of Leading Economic Indicators. Jobless Claims.
Friday: Purchasing Managers’ Index (PMI) Composite.
Source: Econoday, June 16, 2023
This Week: Companies Reporting Earnings
Tuesday: FedEx Corporation (FDX).
Thursday: Darden Restaurants, Inc. (DRI).
Source: Zacks, June 16, 2023
"Kindness eases change. Love quiets fear."
– Octavia E. Butler
3 Facts About Capital Gains
When you sell a capital asset, like an investment or a piece of property, the sale can result in a capital gain or loss. The Internal Revenue Service (IRS) defines a capital asset as “almost anything you own for personal use or own as an investment.” Here are three facts you should keep in mind:
Finding Inner Peace Inside (and Indoors)
Practiced for thousands of years, yoga has had a revival in the last couple of decades. Yoga can be an optimal exercise choice for many individuals of all ages. But before getting started with any fitness regimen, discuss any medical concerns with your healthcare provider; this information is not a substitute for medical advice.
While there are many different styles of yoga, it is generally a low-impact form of exercise. But in addition to the fitness benefits, it can help you learn relaxation and breathing techniques and how to regulate emotions and quiet your mind. It’s also a great form of indoor exercise, and there are thousands of free classes on YouTube. So, if you’re looking for a way to promote both physical and mental health, you can practice quieting your inner monologue and start doing yoga from the comfort of your home.
A major league pitcher faces just 27 hitters in a baseball game. He retires all of them, allowing no runs and no hits. Still, his team loses the game 4-0. How is this possible?
Last week’s riddle: A common English word refers to a person or thing not being in a place. But just by inserting a space within it, you can get two words meaning that a person or thing is present. What is this word? Answer: Nowhere - which breaks into now here.
Mt. Tamalpais State Park, Marin County, California
Footnotes and Sources
2. The Wall Street Journal, June 16, 2023.
3. The Wall Street Journal, June 16, 2023.
4. AP News, June 14, 2023.
5. CNBC, June 14, 2023.
6. CNBC, June 14, 2023.
7. IRS.gov, January 26, 2023
8. Yogabasics.com, February 15, 2023
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The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
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Weekly Market Insights: Stocks Climb After Fed Pause
June 20, 2023