Stocks Roughly Even, Bonds Up; Increased Volatility Can Be Expected
Good morning, and welcome to the official start of summer, and the weather is confirming that.
The Dow (+0.0%), NASDAQ (+0.2%), and S&P 500 (-0.1%) were relatively flat for the week. Meanwhile taxable bonds gained about 0.3% and tax-free municipal bonds gained about 0.2%. The 10-year Treasury yield fell 0.03% to finish the week at 4.38%.
Economic data last week included retail sales and the Fed meeting. Retail sales were weak, dropping 0.6% over the prior month, much worse than expected. However, when looking deeper into the data, the control group used to calculate GDP was up 0.4%, so the data wasn’t as bad as it first appeared. As for the Fed, they kept interest rates the same, as expected by nearly all economists and investors. However, investors and economists’ attention were focused on the Fed’s comments and their “dot-plot projections. Those projections showed a rise in unemployment and inflation slightly above the prior projections made in March. However, none of the Fed members projected interest rate increases, and with a modest bias toward lowering rates in the coming months. The Fed members are still uncertain of the economic impacts of the tariffs and are waiting for future economic data.
The 800-pound gorilla in the room is about the US bombing the nuclear sites in Iran Friday night. Since that occurred after the markets closed, it had no impact on last week, but I was expecting a sharp downturn this morning. Surprisingly, the pre-market stock futures started up this morning, but have leaked their way into slightly negative territory. Regardless, it seems that investors are not exhibiting a large concern with the tensions that are rising in the Middle East. We can expect more volatility in the coming weeks with the Iran conflict, the budget bill making its way through Congress, and the July 9 deadline for the pause in reciprocal tariffs. Further, trading volume is lighter during the summer, which historically causes swifter movements in the markets in either direction. It’s OK to fasten your seatbelt, but there’s no need to jump out of the car. Those who remained diversified through this year’s volatility were rewarded with markets that have nearly returned to their previous highs reached in February.
Have a great day and terrific week. Please be careful out there. Stay cool and well hydrated.
Source: Yahoo Finance
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
