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Weekly Market Update for July 5, 2024

by Vinicius d’Avila, Research Associate

July began on a positive note, with the S&P 500 and Nasdaq reaching all-time highs during the holiday-shortened trading week. This week’s economic data once again revealed the mix of a resilient labor market and a gradual cooling of the economy amidst higher interest rates. Federal Reserve officials still noted the need for more evidence that inflation is approaching 2% before cutting interest rates.

May’s Job Openings and Labor Turnover Survey (JOLTS) report and June’s Nonfarm Payroll data showed higher-than-expected hiring (206,000, better than 190,000 consensus) and job openings (8.140M, versus consensus for 7.905M). The overall unemployment rate, on the other hand, ticked slightly higher (to 4.1%), setting a more nuanced picture of the labor market. The latest Institute for Supply Management (ISM) Manufacturing and Services surveys showed slower economic growth in the sectors, signaling some constriction as businesses face higher interest rates. On a positive note, survey respondents also noted easing inflation, which raises the hopes of lower interest rates by the end of the year.

Interest rates this week, as reflected in the 10-Year Treasury, fell 12 basis points to 4.28%, giving a boost to our fixed income strategy Intelligent Fixed Income (IFI). This reduction is in line with our thinking that the Fed will reduce interest rates meaningfully over the next 24 months or longer. This should provide a tailwind to fixed income securities, particularly preferred stock, the primary security in the IFI strategy.

Next week, new inflation data releases on Wednesday (Consumer Price Index) and Thursday (Producer Price Index) will add more context to the inflation trajectory. Friday’s bank earnings reports (from Citigroup, JPMorgan, and Wells Fargo) will give the market a preview of Q2 earnings season.

Jim returns to the Market Report next Friday after a short vacation.

The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Investors should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All investors are strongly urged to consult with their tax advisors regarding any potential investment.

Performance quoted is past performance. Past performance is not indicative of future performance. There is always a possibility of loss. Current performance may be lower or higher than performance shown. Differences in performance versus the indices/funds may be attributable, in part, to differences in the asset make-up of the strategy vs. the indices/funds. Performance calculations are based on the reinvestment of dividends and gains unless these amounts were paid out to the client. Performance is subject to revision. See www.ullandinvestment.com for important strategy disclosures.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investing involves risk; principal loss is possible. Investors should consider the investment objectives, risk, charges, and expenses of the strategy carefully before investing. This and other important information can be obtained by contacting Ulland Investment Advisors.

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