Market Momentum Supported By The Data, So Far

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

Most asset classes were higher last week as markets seem to be looking past the Fed's rate forecasts.  Market sentiment last week focused on the release of June inflation data.  The Consumer Price Index and the Producer Price Index both declined more than expected on a year-over-year basis.  Key items in the report such as meat, poultry, fish, and eggs showed declines year-over-year.  In fact, inflation at 3.0% is now below the historical average of 3.5%.  The Fed’s Beige Book data further showed that businesses are hesitant to raise prices much further due to consumers who are already sensitive to prices.

And yet, the Fed futures show that a 25 basis point rate hike is likely at the next meeting on July 26th.  Declining prices could offset another rate hike or two.  The key will be how does the consumer respond.  This week’s release of June Retail Sales will provide further insight, but last week’s preliminary release of Consumer Sentiment showed the highest reading in nearly two years.  The Fed’s own estimate of 2nd quarter GDP was revised higher last week.  Their estimate currently shows +2.3% growth in GDP versus the low of +1.6% just a few months ago.  Corporate earnings will be eyed this week to determine if current market valuations are justified.  Fed comments will be limited this week as they go into “blackout” before next week’s meeting.

___________________________________________________________________________________________________________

Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. 

Past Performance does not guarantee future results.