Weekly Market Report: June 14th, 2024

Markets took in some important inflation data and a highly anticipated FOMC meeting last week. The headline S&P 500 (+1.6%) marked a new record high supported by continued strength in the mega cap names. Small caps continued to struggle in comparison to mega caps, losing 1% last week, and are now in the red for the year. European stocks took the overall international markets lower (-4.2%) due to the tenuous political situation in France while emerging markets moved marginally higher (+0.45%). Bond yields declined sharply last week pushing the 10yr UST yield back down to 4.2%. WTI oil gained nearly 4% on the week, drawing closer to the $80 level alongside some notable strength in the USD, particularly versus the Euro.

Market Anecdotes

  • Narrow U.S. equity market breadth continued last week with AI tailwinds and soft landing narrative supporting big tech while signs of slowdown in the labor market are beginning to weigh on cyclicals and smaller stocks.
  • Inflation data released last week supported the disinflationary trend narrative with, notably, the “super core” measure contracting MoM for the first time since January 2021.
  • While acknowledging friendly base effects in YoY CPI, researchers are challenging dovish policy forecasts by questioning rate cut expectations with headline CPI still over 3%, election year dynamics, and the fact that ‘super core’, while declining, is still 1.1% higher than October 2023.
  • The FOMC and monetary policy watchers welcomed another soft inflation print with strategists now seeing two cuts later this year. The dot plot is now indicating one cut in 2024 and four cuts in 2025 with guidance that softening data must continue to present itself going forward.
  • Alpine Macro recently joined BCA in forecasting a possible ‘soft patch’ this summer based on what they see as a weakening labor market/consumer. They see slowing demand for oil with WTI down 12% since April and a UST rally since late April as potential confirmation.
  • Despite unemployment moving to 4%, the Sahm Rule has yet to trigger with the 3mo average U-3 of 3.9%, now sitting 0.37% above the prior 12mo low U-3 of 3.5%.
  • The BoJ met last week and despite exiting NIRP back in March, soft inflation data has led them to hold rates steady for a second straight meeting and they opted to push back any changes to the bond buying program for the time being.
  • The European Commission announced additional tariffs on Chinese EV imports last week of 17%-38%, on top of existing 10% tariffs.
  • Political turmoil in France caught the attention of European investors with a sizable left-wing coalition forming in response to a surprise loss by Macron to the right wing National Rally party.

Economic Release Highlights

  • May CPI YoY Headline (3.3% vs 3.4%) and Core (3.4% vs 3.5%) along with MoM Headline (0.0% vs 0.1%) and Core (0.2% vs 0.3%) declined from April readings and came in below forecasts.
  • May PPI YoY Headline (2.2% vs 2.5%) and Core (2.3% vs 2.4%) along with MoM Headline (-0.2% vs 0.1%) and Core (0.0% vs 0.3%) declined from April readings and came in below forecasts.
  • June’s Consumer Sentiment reading came in well below expectations (65.6 vs 73.0).
  • The May NFIB Small Business Optimism Index improved slightly to 90.5 from April’s 89.7 reading.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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