Market Notebook

PRICE ACTION:
Equity prices, as measured by ticker SPY, and bond prices, as measured by ticker BND, closed lower on the week.

TECHNICAL ANALYSIS:
SPY appears established in an upward trend while BND price action suggests consolidation.

SENTIMENT:
Sentiment remains bullish for U.S. equities.

ECONOMY AND FUNDAMENTALS:
Economic indicators within the Market Notebook have improved from their lows, suggesting a possible recession is in the rearview mirror for this economic cycle.

Equity prices appeared to come under pressure last week because of positive news in the real economy. To market participants, this raises the possibility of delayed rate cuts by the Federal Reserve. This is an unintuitive regime because good economic news translates into equity price pressure.

Throughout the tightening cycle, jobless claims have never indicated recession by our measure. In fact, jobless claims suggest “normal” market conditions will likely continue over the short term.

Although indicators suggest fundamentals are improving, it is worth noting that market participants should be on the lookout for recessionary conditions following the first rate cut after a tightening cycle. It seems likely that the first rate cut will happen in late 2024 or early 2025. To avoid recessionary conditions, the Federal Reserve will have to get the timing of rate cuts exactly correct. Thus far, the Federal Reserve has managed the economic cycle well.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.