Market Recap – June 14, 2024

Summary:

  • Weekly Returns (Friday Open – Thursday Close) & YTD Returns*: [1]

Markets were mixed this week: the CPI was lower than expected, but the Fed kept interest rates steady.  Tech stocks surged as Apple showcased new AI features at their developer conference.  Meanwhile, international markets slumped due to political turmoil in France, the euro-zone’s second-largest economy.. [1]

  • Apple’s AI: Apple introduced its first generative AI features, including personalized Genmoji and a smarter Siri, through “Apple Intelligence.” Partnering with OpenAI, Apple’s integrating ChatGPT into its products while ensuring on-device privacy.  Apple also announced updates for iOS, MacOS, AirPods, and the Vision Pro headset, focusing on AI-driven features and user personalization.  The announcement caused a sharp increase in the share price, furthering the tech stock bull market. [2]
  • CPI Inflation: CPI inflation came in below expectations, with headline CPI rising 3.3% year-over-year and core CPI, which excludes volatile food and energy prices, up 3.4%. Markets reacted positively to the report, as this marked the smallest monthly increase in core CPI since 2021.  [3]
  • Federal Reserve Meeting: The Federal Reserve has decided to maintain current interest rates and reiterated its 2% inflation target.  Additionally, the Fed adjusted its 2024 outlook, reducing the expected rate cuts from three to one, and raised its inflation forecast for 2024 from 2.6% to 2.8%. [3]

Chart of the Week:

Source: Torsten Slock, Ph.D.

Economic Outlook:

Summary: 

Recent economic indicators, including labor markets, retail sales, and sentiment, have underperformed expectations. Despite this, prospects for strong growth in the next quarter remain optimistic.  They are supported by increased government spending, advanced purchasing manager indices, inventory restocking, improved banking liquidity, and robust earnings. The Atlanta Fed’s GDPNow estimate for Q2 2024 is currently 3.1%. [5]

  • Unemployment: We assign a greater than 80% probability of the unemployment rate ending 2024 at over the Fed’s 4.0% target due to an increase in layoffs as heavily indebted firms struggle to refinance their debt at higher interest rates. [6]
  • Inflation: We expect inflation to remain above the Fed’s target in 2024, barring an unforeseen recession. Consumer demand is still growing, albeit at a slower pace. Supply-side shocks, including freight rates, commodity prices, and food prices, are rebounding. [7]
  • Consumers: Our analysis indicates that consumer demand is expected to remain strong, contingent upon the unemployment rate maintaining a level below 4.5%. Nevertheless, we maintain a cautious stance regarding the potential for consumers to overextend themselves financially through excessive use of credit.

*Dow Jones is price return

*SP500 is price return

*NASDAQ is price return

*US Small Cap Stocks is Russell 2000

* US Bond Market is Bloomberg Aggregate

*International Stocks is MSCI ACWI ex-US Index

*Weekly Returns is May 23rd, 2024-May 30th, 2024

*YTD is Jan 2nd, 2024-May 30th, 2024

By: Nick Colletta, CFA, CAIA

Sources:

  1. https://www.morningstar.com/
  2. Apple Intelligence: Everything Apple announced at its big AI event | CNN Business
  3. CPI Home : U.S. Bureau of Labor Statistics (bls.gov)
  4. Fed Beige Book Shows Modest Economic Expansion Ahead Of Key GDP, Inflation Data Release (yahoo.com)
  5. GDPNow – Federal Reserve Bank of Atlanta (atlantafed.org)
  6. Businesses continue to struggle with high prices and interest rates | Federal Reserve Bank of Minneapolis (minneapolisfed.org)
  7. Drewry – Service Expertise – World Container Index – 23 May

Bridge Advisory LLC Disclosures

Bridge Advisory, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Investment Advisory Services offered through Bridge Advisory, LLC. Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Information herein has been obtained from sources believed to be reliable, but Bridge Advisory, LLC. does not warrant its completeness or accuracy; opinions and estimates constitute our judgment as of this date and are subject to change without notice. This newsletter expresses the views of the authors as of the date indicated and such views are subject to change without notice.

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