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The Market Down & Dirty 06.17.24

Updated: 3 days ago

The Data


Equities were mixed last week as Mega-Cap Tech led to the upside once again.

  • S&P 500 +1.64% Dow -0.54% Russell 2000 -0.95%, Nasdaq +3.24%.[1] 

  • The All-Country World Index rose +0.38%.1


S&P 500 sub-sectors were mostly lower last week.

  • Technology led to the upside by a wide margin with a +5.60% gain.1

  • Energy & Financials led to the downside with losses over 2%.1


The CBOE Volatility Index (VIX) rose +3.52% to end at 12.65.1

 

US Treasury bond yields moved lower across the maturity curve.

  • US 2yr -0.21% at 4.67%, 10yr -0.23% to 4.20%, 30yr -0.21% to 4.34%.1

  • Bonds have now recaptured a bullish trend with their recent price action.


Commodities as an aggregate asset class were mixed last week.

  • WTI Crude declined +3.89%.1

  • Gold was down +1.69%.1

  • The US Dollar index was up +0.59%.1


In our opinion, U.S. economic data was mixed last week.

  • The Federal Reserve maintained interest rates where they are.1

  • The Consumer Price Index showed slowing inflation over the last month and year.1

  • Initial & continuing jobless claims came in higher than expected.1

 

An index of equities outside the US (FTSE All-World ex-US) underperformed at -1.34%.1


 

Conclusion


Equity indices ended the week mixed as Mega-Cap Tech drove the S&P 500 to its 7th gain in the past 8 weeks.

  • The tech-heavy Nasdaq smoked all other indices to the upside with a gain of 3.64%.

  • The S&P 500 gained 1.64% while the Dow Jones Industrial Average and small-cap tracking Russell 2000 declined.

  • The S&P 500 now carries a 35% weighting in the Tech sector.

  • This does not include Consumer Discretionary or Communication Services which are each an additional 9% weighting.


US Treasuries saw yields decline despite the Federal Reserve’s new projection of only 1 rate cut in 2024 and Fed Chair Powell’s seemingly hawkish press conference.

  • Despite the Fed’s future projections, bond traders immediately began to price in more rate cuts this year after softer than expected inflation data.

  • Fed policy diverging from their global peers that are already in cutting mode has been offering support for the US Dollar.


Elsewhere in the world of debt securities, credit spreads remain exceptionally low despite some deterioration in various metrics of the real economy.

  • Demand from Asian investors and to a lesser extent Europeans has been a key support for US dollar corporate bonds, stocks and money-market funds this year.


For company debt, the voracious appetite has helped absorb this year’s near record supply, up about 20% from this time last year.

  • Interestingly, our data models show US Treasuries turning positive trend vs High Yield corporates as of the end of last week.

  • If this continues, we could see credit spreads widen out as demand turns elsewhere.


Non-US equities underperformed the S&P 500 by a significant margin last week.

  • US equity outperformance is creating headaches for anyone following a strategy of global diversification.

  • Among 644 exchange-traded funds that specialize in international assets, less than 7% have managed to beat the S&P 500 over the last 1 year.

  • This follows aggregate equity positioning climbing to its highest level of concentration since November of 2021.


Additionally, it’s not just global diversification that is struggling as declining issues and new 52 week lows outpaced risers and new 52 week highs last week despite the S&P 500 hitting a new all-time high.

  • This was the first such occurrence in the history of the index.


Justin Greenhill - Chief Investment Officer – justin@sollinda.com           

Ryan A. Mumy, CFP®, AIF® - CEO – ryan@sollinda.com   

Phone:  844/662-1211


[1] Source: Bloomberg – 5/24/2024

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