Market Notebook

by | Jun 23, 2024

Discussion – 

Equity prices, as measured by ticker SPY, closed higher, while bond prices, as measured by ticker BND, closed lower last week.

SPY    +0.32%
BND    -0.19%

SPY price appears established in an upward trend, while BND price action suggests wide-ranging consolidation.

Sentiment remains generally positive for equities.

Consensus is forming around the idea that inflation could be within the Federal Reserve’s target range by year-end.

“The U.S. LEI fell again in May, driven primarily by a decline in new orders, weak consumer sentiment about future business conditions, and lower building permits,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “While the Index’s six-month growth rate remained firmly negative, the LEI doesn’t currently signal a recession. We project real GDP growth will slow further to under 1 percent (annualized) over Q2 and Q3 2024, as elevated inflation and high interest rates continue to weigh on consumer spending.”

Economic indicators within the Market Notebook remain mixed. The 10-year minus 3-month yield curve and the Conference Board’s Leading Economic Index signal caution, while the remaining indicators indicate normal conditions.

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

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.