The markets in May were mixed, with
Technology reigning supreme. June didn’t see a reversal of fortunes but added to the positive
momentum across most sectors. Apple (+49%) hit and
closed at the $3 Trillion value mark. Nvidia (+189%), Microsoft (+42%) and Meta (+138%) continue to march higher on AI news and helped to
deliver a 40-year historical performance for the NASDAQ this year.
Banks had their most strenuous stress tests and did very well in the heavy
recession scenarios presented. This was another key to the positive market action at the end of
the quarter. The stock market has made gains for the first six months despite a low growth
environment with rising short term interest rates and high inflation. This reinforces the view that the market
acts as a forward indicator of the economy.
S&P 500: June +6.47%
YTD +15.90%
DOW:
June +4.55%
YTD +3.80%
NASDAQ: June +6.59%
YTD +31.73%
Russell 2000: June +8.08%
YTD +7.37%
Sector Performance
YTD:
Communication Services +35.58%
Consumer Discretionary +32.33%
Consumer Staples -0.04%
Energy -7.26%
Financials -1.51%
Healthcare -2.33%
Industrials +9.22%
Materials +6.61%
Real Estate +1.85%
Technology +42.06%
Utilities -7.16%
U.S. Treasury
Yields:
6 Month Bill 5.43%
2 Year Note 5.02%
5 Year Note 4.15%
10 Year Note 3.83%
30 Year Note 3.85%
Global Markets and The Federal
Reserve
GDP was revised for Q2 to 2.2%
displaying continued strength in the economy. The Federal Reserve continued its hawkish tone
intimating perhaps two more rate hikes for 2023. The strong economy is a
headwind to taming inflation and the Fed’s 2% target may be too low and not
realistic. Recession is clearly off the table for 2023 and may not materialize in
2024 as a soft-landing outcome gains traction.
The ISM manufacturing number came in at 46.0 for June, the lowest since May
2020. This represents eight straight months below 50 as
manufacturing struggles with rate increases and a shift in consumer spending to services/experiences. The Fed
continues to grapple with a tight labor market and high housing costs.
China continues to struggle with manufacturing as its economy contracted in June. Although its
services sector advanced for the month, it was still at a slower pace than forecast. The Japanese market
is up 25% in 2023, turning in its best performance in a decade. The
U.K. market has been battling inflation and is essentially flat YTD. France
(+12%) and Germany (+15.43%) have fared better.
Looking Ahead
With the markets having closed out the first six months near all-time
highs, and the S&P 500 trading at 20x 2023 earnings
projections, investors are rightly cautious. Although money has come off the sidelines and into
the markets, specifically small and mid-caps, broadening out the market
momentum, there is still over $5 trillion in money market funds.
Q2 earnings begin mid-July with the banks. Technology names have high
expectations which could prove problematic. We remain optimistic. As well,
portfolios are bolstered with Treasury Bills and money markets delivering roughly
5% yields. This provides a buffer to market volatility. We will remain
selective on the buy side.
!!!!HAVE A HAPPY FOURTH OF JULY!!!!
GN&Co