First off, the Federal Reserve has decided to put its foot on the brake, slowing the pace of rate hikes. This decision, however, is not a conclusive halt but more of a temporary recess, in response to lags in economic data. Fed Chairman Jerome Powell emphasized that progress has indeed been made to reel in inflation, but we are far from the finish line. Even as our economy continues to grow steadily, increased interest rates have been acting as a sort of governor on overall business investment. Powell acknowledged an easing trend in wage growth, but made it clear: the Fed is not taking potential future hikes off the table just yet.
Looking ahead, 75% of the analysts we surveyed predict the next hike to fall in about five weeks, during the Fed’s next rendezvous. With no other hikes currently baked into their forecasts, this leaves room for a substantial amount of economic data to roll out before the next meeting, allowing the Fed ample time for potential recalibration. The five-week timeline also coincides with the heart of Q2 earnings season, a period that’s sure to influence both investor sentiment and the Fed’s perspective on the market’s trajectory.
In terms of market performance, June saw the spotlight shining brightly on consumer cyclicals and industrials, leading the pack in a month where all 11 sectors are currently in the green. Housing showed significant vigor, with new home sales outpacing expectations and bouncing back strongly from recent lows. To put a number on it, new home sales have surged by 26% since last July, while existing home sales have shown a more modest recovery of 7% since their January low.
June also witnessed a number of tech titans flexing their muscles. Standout performances came from Unity Software (U) and MongoDB (MDB) – both buoyed by robust earnings and future guidance – as well as Tesla (TSLA) and Carnival Corp (CCL), with each scoring a hefty 30% gain over the course of the month.
But not all was rosy in the tech world. After a significant rally, chip stocks began to simmer down, as investors weighed the valuations and contemplated the recent AI-driven surge that heavily impacted names like Nvidia (NVDA). Furthermore, the potential imposition of new export restrictions on China made waves, triggering a pullback in chip stocks from their recent highs.
As we move forward into the rest of the summer, we remain vigilant, ever-attuned to the ebb and flow of the market. Our commitment to keep you updated with the most relevant, timely information continues unabated, ensuring you can navigate these waters with confidence. Stay tuned for more updates as we delve further into this intriguing financial journey.