Economic Update 6-10-2024
- Economic data for the week included gains in ISM services coupled with a decline in ISM manufacturing. The monthly employment situation report came in stronger than expected.
- Equities earned positive results globally last week, led by the U.S. growth sector. Bonds also fared positively, as interest rates broadly declined. Commodities fell across the board last week.
U.S. stocks fared positively again last week, with investors digesting the mix of economic data. Interestingly, despite a weaker start Fri., stocks shrugged off the strong May employment report, although the strength implied a longer timeline for a Fed pause. By sector, leaders were technology (with strength in Nvidia, helped by the release of a new generation of chips, and perhaps also by a 10-for-1 stock split) and health care, with gains of 4% and 2%, respectively, followed by communications and consumer discretionary; utilities and energy lagged with declines of over -3%. Real estate was little changed, despite the fall in interest rates during the week. Large caps outperformed small caps.
Foreign stocks were mixed, with declines in developed markets, mostly in the U.K. The Bank of Canada chose to cut rates last week, as did the European Central Bank later—the latter by a quarter-point down to 3.75%. There was one ECB dissenter, in keeping with the more hawkish tone, with inflation still higher than many would care to see, along with wage growth running at just under 5%. Since its 1999 inception, this was the first instance of the ECB cutting rates before the U.S. Fed did, and it appeared to be a hesitant cut, with the press conference afterward a bit non-committal to future policy moves.
Emerging markets saw gains on net, led by positive weeks in Taiwan and Korea that offset a dramatic week elsewhere, with several key elections driving sentiment. Indian stocks lost over -5% post-election as the majority supporting PM Modi appeared tighter than the landslide expected, as well as parliamentary gains from opposing parties. However, the shock wore off by Friday, with gains of nearly 4% as the narrative of the benefits of a more balanced democratic government took hold. On the other hand, Mexico’s landslide election gave significant power to a single party, and fears of a return to an autocratic past that were prone to periodic crises, leading to double-digit equity declines in USD terms, as the currency was impacted more than the local stock market. South African elections ended up being less extreme than expected, which helped equity and currency returns, but the week still ended negatively.
Bonds fared positively last week, as yields fell across the curve. U.S. Treasuries led, followed by investment-grade corporates, although high yield bonds also gained to some extent. Foreign bonds were mixed along with a stronger dollar (influenced by ECB rate cut activity).
Commodities generally fell back last week, along with a stronger U.S. dollar, with industrial metals faring worse than other categories, down -4%. Crude oil prices declined -2% last week to $76/barrel, as OPEC+ decided on a complex set of updated rules, which included removing voluntary supply cuts later this year, sooner than expected, and potentially opens the floodgates for additional supply. All else equal, some countries would prefer to over-produce (at the expense of other countries) to maximize revenue, even though overall higher production can dampen prices, so incentives in the space can be tricky. Natural gas prices spiked 13% as weather conditions heated up.
|
Period ending 6/7/2024 |
1 Week % |
YTD % |
|
DJIA |
0.33 |
3.86 |
|
S&P 500 |
1.36 |
12.81 |
|
NASDAQ |
2.40 |
14.51 |
|
Russell 2000 |
-2.07 |
0.56 |
|
MSCI-EAFE |
0.61 |
7.72 |
|
MSCI-EM |
2.36 |
5.85 |
|
Bloomberg U.S. Aggregate |
0.44 |
-1.21 |
|
U.S. Treasury Yields |
3 Mo. |
2 Yr. |
5 Yr. |
10 Yr. |
30 Yr. |
|
12/31/2023 |
5.40 |
4.23 |
3.84 |
3.88 |
4.03 |
|
5/31/2024 |
5.46 |
4.89 |
4.52 |
4.51 |
4.65 |
|
6/7/2024 |
5.52 |
4.87 |
4.46 |
4.43 |
4.55 |
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.