Market Musings 7/10/2024

Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!

The S&P 500 continued to rally in June up +3.5% on significantly lower inflation data from May. Market optimism has extended into July with markets higher ahead of another round of inflation data.

🐌 Slowing June

#RateCuts cheer returned in June with May inflation data considerably slowing across all three major datapoints. The core CPI was up +0.2% M/M, core PPI flat M/M and core PCE up +0.1% M/M.

Not much surprise with the June Fed meeting either. The Fed held rates flat, but reduced its dot plot forecast from 3 cuts to 1 this year. While the Fed meeting was a bit hawkish overall, investors were optimistic that the new inflation data was not priced into forecasts yet. Markets rallied on renewed hopes for multiple #RateCuts-hopefully starting in September.

🎆 July Fireworks

While the bullish sentiment stalled in towards the end of June, markets rallied to kick off July. Dovish commentary from Fed Chair Powell added fuel noting signs inflation was resuming a disinflationary trend. Meanwhile, #LaborMarkets also continue to weaken with job growth slowing and unemployment ticking up.

Everything seems to be bolstering investor expectations for incoming #RateCuts to get to the coveted #Goldilocks soft landing. Markets have continued to trend up this week as well ahead of the June CPI and PPI releases.

We expect tomorrow’s CPI release to be a big catalyst in either direction. We’re still not sold yet that we’re out of the inflation woods and could still see more #RateCuts expectation disappointment. However, we believe markets are so overly optimistic that any news will be viewed as the glass half full on the way to #RateCuts.

With this attitude, we don’t expect pull backs to last long in this market environment. The true test is likely what’s the market’s next rallying cry once #RateCuts officially begin.

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The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.

Original photo by fauxels.