Stock Markets Rebound with Strong Rally; Bonds Also Rise

The US stock market indices exhibited a very strong week with the Dow (+5.4%), NASDAQ (+7.5%), and the S&P 500 (+6.5%). Taxable bonds also gained about 0.5% and tax-free municipal bonds rallied about 1%, both of which reversing the course from the past couple weeks.

Don’t get too excited by the market rally last week. The markets had a similar rally in the last week of May, and look what followed it - the markets fell about 10% in the first three weeks of June. Last week may have been an ironic example of “bad news is good news”. Economic data in the US and across the globe was weak, exhibiting a decline in growth from the prior month, but not quite in a contractionary period (yet). As such, it gave investors some optimism that the Fed may be less aggressive with rate hikes if the economy continues to slow at a rapid pace. We will remain in this “dead zone” for a few weeks, as we await June’s inflation data and the beginning of the second quarter earnings season. Until then, this is all just noise, but admittedly, I like the noise when the markets go up. I’m just not a believer yet.

Have a great day and week, and I hope you enjoy your holiday weekend and the unofficial start of summer. Happy 246th birthday, America!

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