In Markets "In a Nutshell"

Markets “In a Nutshell” for June 12, 2023

Investment Week at a Glance

Stocks finished higher for the week.  The Dow Jones Industrial Average rose 0.30%, the S&P 500 was up 0.40%, and the NASDAQ rose 0.10%. Foreign stocks (MSCI EAFE) were also up, rising 0.4%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.74%.  (Data source: Wall Street Journal)

Bull Market Territory

The S&P 500 is now up about 20% from its lows in mid-October which could indicate a new bull market. This rally has been driven by artificial intelligence enthusiasm and economic strength as the Fed has continued to raise rates. The rise in the market indices has also been mainly top-heavy as the mega-cap names continue to outperform the broader market. Apple for example is near its all-time high and is up nearly 50% for the year. NVIDIA has become one of the largest market cap companies in the United States as it peaked at over $1 trillion recently after rising over 170% for the year. The question investors are asking now is, “Is this the longest bear market rally ever or one of the weakest starts to a bull market?” This rally has now lasted 240 days, nearly 100 days longer than any other bear market rally if this is what it ends up being. On the flip side, in a new bull market, the S&P 500 typically gains 38% on average in the first 8 months, currently we are only up 20% on the past 8 months. Whichever scenario plays out, it will be an outlier in comparison to market trends historically.

How the Economy Has Absorbed Higher Rates

Typically, when the Fed raises rates the economy slows down due to the tightening of the financial system. While we could see this play out in the coming months, we have avoided a slowdown so far. This is because households built up savings during the pandemic as they could not spend as much, and the government was sending out stimulus. With everything being shut down, the consumer had pent-up demand to travel, go out to eat, and other forms of entertainment. The other reason is that the labor market remains tight as unemployment is still historically low. Companies are still paying for people to come back to work and this is giving the consumer more money to spend which is helping keep the economy from entering a recession.



What percentage of pandemic savings have been used by the USA consumer? (Scroll Down for Answer)

  1.     60%
  2.     70%
  3.     80%
  4.     90%














































Answer below.



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1.   60%. Pandemic savings peaked in August, 2021 at $2.15 trillion. Currently there is an estimated $900 billion left in excess savings from the pandemic. This has helped the consumer remain strong and will continue to do so as the rate hikes work their way through the economy.