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Market Recap – June 26, 2023

Keel Point

June 26, 2023

U.S. equity markets are having one of the best starts to a year in 25 years.  After giving back about 2.5% from the 2023 market peak on June 16, the S&P 500 closed last Friday up 13.7% YTD. 

  • The U.K. startling inflation number last week most likely was a contributor to stock market profit taking, thereby driving markets down for the week.
  • The outlook continues to be broadly positive for economic growth, declining inflation, and positive earnings per share growth, with hiccups from time to time in incoming data.
  • Consumer sentiment is up 28% (y/y) (U of Michigan), with one-year forward inflations expectations down, which is particularly helpful to the Fed.
  • FactSet reports Q1 US earnings season has resulted in a 3% pick up in year ahead EPS estimates to $232, and full year 2023 EPS estimates are now forecast to rise 2%.

The conversation about recession continues:

  • Many are convinced of its inevitability, pointing to a further decline in the Leading Economic Indicators Index and the still inverted yield curve which contributes to lower bank lending and tighter credit markets.
  • Fed funds futures markets are showing a 75% chance of another rate increase at the end of July, and negative M2 money supply growth will start to create an additional drag on economic activity.
  • On the other side, the Atlanta Fed Q2 GDP nowcast is close to 2% with both housing and inventories expected to add to Q2 GDP growth.
  • Unemployment remains low and consumer balance sheets are strong, with low debt loads and unspent savings from Covid relief transfers. So, consumer spending will remain a positive contributor to GDP growth.

The India Prime Minister’s visit to the U.S. last week resulted in further strengthening of U.S.-India ties in the US-led vs China-led global economic realignment.  While India will continue to capitalize on its non-aligned political stance in buying discounted Russian oil, it will deepen its relationships with the U.S. for both economic and political reasons. 

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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