Markets “In a Nutshell” for June 18, 2019
Investment Week at a Glance
Stocks finished mostly up for the week. The Dow Jones Industrial Average was up 0.41%, the S&P 500 rose 0.47 %, the New York Stock Exchange Composite (2,000 stocks) rose 0.17% and the average investors index (Value Line Index) was up 0.23%. Foreign stocks (DJ Global ex U.S.) were down 0.16%. Bond prices were unchanged for the week, leaving the yield on the 10-year U.S. Treasury at 2.09%. (Data source: Wall Street Journal)
Markets Anticipating Fed Meeting
Markets are optimistic that the Fed will capitulate to market concerns that the U.S. economy is in need of a rate cut in the next couple months and possibly two by the end of the year. While inflation data showed last week a rate cut is certainly a viable option, the Fed is in the beginning stages of determining what constitutes the need for cutting rates. If the Fed wants to focus on broader economic data, it may simply decide to continue its current pause in rate changes. Retail sales data showed that over the past two months, consumers are continuing to spend at a respectable pace and push the economy forward. The May jobs report, although much lower than anticipated, still showed positive job gains and may be a blip in a month where floods may have had a major impact on hiring in the Midwest and South. While the market is convinced at least one rate cut is coming this year, the Fed may be stuck deciding between diverging from data that doesn’t warrant a cut or risk sending a shock into the market. (Barron’s)
Strong June Continues
The S&P 500 is up just under 5% so far in the month of June and is only 2% away from its record close. A more patient sounding Fed and a resolve to the short trade/immigration conflict with Mexico have just about erased the losses experienced in May, even though many of the same risks still remain. Trade negotiations are frozen with China with almost no hope in sight for a deal in the near term. Presidents Trump and Xi of China may meet in Japan at the end of the month for the G-20 Conference, but very little progress is expected to be made, if any. The market also has a tall order set for the Federal Reserve as the Committee is set to meet this week and they may end up be hesitant to deliver. The market doesn’t necessarily expect a rate cut this meeting, but is looking to see a much more cautious Fed that seems open to cutting rates this year. As the past two years have gone by, it seems like the momentum needed to break out of the back and forth the market has been stuck in is going to continue being elusive. (Barron’s)
Over the last 12 months, how much has the S&P 500 (large-cap stocks) outperformed the Russell 2000 (small-cap stocks)?
Answer is below…
Have a good week!
d. The S&P 500 has outperformed the Russell 2000 by 11% in the past 12 months. The 5th time a double digit out-performance has occurred over the last 20 years. (Barron’s)