Markets “In A Nutshell” for July 31, 2023

Markets “In a Nutshell” for July 31, 2023

Investment Week at a Glance

Stocks finished up for the week.  The Dow Jones Industrial Average rose 0.70%, the S&P 500 was up 1.00%, and the NASDAQ rose 2.00%. Foreign stocks (MSCI EAFE) were also up, rising 0.7%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.96%.  (Data source: Wall Street Journal)

Fed Raises Rates

The Fed once again raised rates as expected last week by 0.25% bringing the target rate to 5.25%-5.50%. Fed Chair Powell said they had not determined whether this would be their last rate hike or not but did acknowledge inflation has declined substantially from its peak. The next Fed meeting is not until September 20th which will give the Fed two more inflation readings and two more jobs reports before they have to make a decision. The market believes that this was the last rate hike we see, with rate cuts beginning in the 1st quarter of 2024. This is just what is currently priced into the market and can obviously change as new data comes in. If inflation begins to tick up, the Fed is more likely to raise rates once again. If the economy weakens the Fed could begin to cut rates quicker than expected in an effort to boost the economy.

Economic Trends and the Market

The market has continued to move higher recently and may be embracing a “Goldilocks” scenario. The Fed and other global central banks are nearing the end of their rate hikes. Inflation has continued to decline and is now near more normal levels that the economy can handle. The economy continues to grow despite the rate hikes that have taken place over the past 18 months. If these three statements continue to be true, this would be the best-case scenario for the market and economy. Job numbers also continue to be strong which continues to allow the consumer to stay strong which supports the economic growth we have seen. More recently, the sectors that are most sensitive to the economy such as small-caps and cyclicals have led the way. Tech has led the way most of the year, so it is good to see the market rally beginning to broaden.

Quiz:

Quiz

How many times has the Fed raised rates in the past 12 meetings? (Scroll Down for Answer)

1.     7 times
2.     9 times
3.     11 times
4.     12 times

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

Answer:

3.    11 times.  This is the 11th time in the last 12 meetings the Fed has raised rates. This has helped inflation come down, but we have never seen rates go from 0 to 5.25% before and this was done quickly. The market will pay close attention to how the economy reacts to these hikes?