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Weekly Market Update for June 28, 2024

by Vinicius d’Avila, Research Associate

Indexes traded relatively flat during the week, as even expected market movers (Thursday night’s Presidential Debate and Friday’s release of the Fed’s preferred inflation gauge, the PCE) received a mild reaction from investors. Core PCE (ex-food and energy prices) was in line with expectations, cooling 0.2% on an annualized basis to 2.6% (the lowest annual rate since March 2021). Headline annualized PCE also came in at 2.6%, moderating 0.1% from last month.

On Wednesday, the Federal Reserve released the results of their annual “bank stress” test, which simulates a hypothetical recession to see if banks have enough financial reserves to survive. As expected, the test concluded that all 31 participating banks can remain above required capital minimums even in a tough economic downturn. This underscores the solidity of major US financial institutions, who, in the words of the Fed, are “well positioned to weather a severe recession”.

As we close out June, we highlight the AI-driven performance in Equities through the first half of the year, with the S&P 500 up 14.5% and the Nasdaq appreciating 18.1%. With a still-resilient economy, this week’s UMich consumer sentiment report came in better than anticipated, with consumers expressing confidence that inflation will continue to moderate in the year ahead. Inflation expectations are an important component in the Fed’s calculation to lower interest rates, and were down from last month’s 3.3% to 3.0% (also lower than last month’s 3.4% Consumer Price Index). Investors are currently pricing in a 0.5% interest rate reduction by the end of the year, per the CME FedWatch Tool (with the first 0.25% cut in September).

The market and our office will be closed next Thursday for the 4th of July holiday. Labor market assessments will take the lead on the economic data front, with scheduled reports on Tuesday (Job Openings and Labor Turnover Survey) and Friday (Nonfarm Payroll, Hourly Earnings, and Unemployment).

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.

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