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Market Recap – June 12, 2023

Keel Point

June 12, 2023

Financial markets are waiting to see if the Fed follows through on its intended “pause” in  rate increases after seeing the May CPI and PPI inflation reports Tuesday and Wednesday morning, and what it says in its updated Summary of Economic Projections.  

  • While no interest rate change in June is expected, there is a big question about their outlook for inflation and GDP growth estimates for 2023 & 2024 and whether their meeting statement will indicate an intention to hike interest rates at their meeting in late July.  
  • The May CPI and PPI inflation – both headline and core – are expected to show some further improvement after basically no change in April, which created angst about how sticky core inflation had become. 

Very often we are asked if a recession is already underway in the U.S. Several indicators are  signaling it.  

  • In new trade data reported last week, the big jump in negative net exports and working down of business inventories may be enough to offset an expected +2% growth in consumer spending, unless business investment overall is better than expected.  
  • YTD job growth has been strong, but last week’s surge in initial jobless claims to above  250,000 is worrisome. Also worrisome: M2 money supply contracting YTD, an inverted yield curve, and Leading Economic Indicators still declining. We don’t know when or if a  recession is likely to begin, but it’s hard to see how we avoid one, whether it begins in Q3  2023 or 2024. 
  • On the positive side, the banking crisis is easing, the debt deal is done and the buzz about AI  is driving positive performance in the Nasdaq and the top 5+ in the S&P 500. 

The S&P 500 closed last Thursday at 4,293.93 providing a gain of more than 20% from its  October 12 low, ending its longest bear market since 1948. It remains 10.5% below its  January 3, 2022, peak of 4,796.56.  

  • In the last 11 bear markets, after stocks rallied back 20%, the S&P was up on average another +22% over the next year (JPMorgan). 
  • Evercore increased its S&P 500 forecast to 4,450 and its 2023 EPSe to $214 from $206. 

Disclosure: Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC. Brokerage and Investment Advisory Services are offered under the Keel Point brand. Investment Advisory Services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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