It was an eerily quiet week in the markets this past week. Was it the quiet before the storm, the beginning of the dog days of Summer or simply that at this point the financial markets have reached somewhat of a point of equilibrium, given the current economic and geopolitical environment? We have been saying for quite some time that stocks and bonds (interest rates) will most likely remain rangebound, buoyed by a resilient economy, but kept in check by rich valuation. Presently, we have no reason to change that tune.
· The Open Market Committee of the Federal Reserve (FOMC), the group charged with determining interest rate policy, concluded a two-day meeting this past Wednesday, leaving interest rates unchanged. There were two comments from Fed Chair Jerome Powell that merit mentioning.
“The U.S. Economy has defied all kinds of forecasts for it to weaken, really over the last three years, and its’ been remarkable to see… again and again when people think it’s going to weaken out. Eventually it will, but we don’t see signs of that now.”
“Everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs. It will be someone in that chain that I mentioned, between the manufacturer, the exporter, the importer, the retailer, ultimately somebody putting it into a good of some kind or just the consumer buying it.”
· President Trump Responded to the Fed’s “Action” on Social Media Site, “Truth Social. “Too Late – Powell is the WORST. A real dummy, who’s costing America $Billions!” Certainly, the Powell led Fed was late to the interest-rate raising party as the U.S. Economy exited from the COVID Pandemic, resulting in a spike in inflation. We’ll see if they are now too late to cut. Time will tell.
· The initial two paragraphs from an article written by Samantha Lamas (June 3, 2024) may give pause to some. “The narrative of a miserly, Scrooge-like figure hoarding his wealth for years instead of enjoying his retirement might seem unbelievable – but unfortunately, it isn’t relegated only to fiction. It’s a cold reality for many retirees. Although most retirees’ stories aren’t as dramatic as Scrooge’s, it’s not uncommon for retirees to have more than enough to live comfortably for the rest of their lives but still think a vacation is out of the question. In fact, a number of retirees actually experience a sharp decrease in spending and increase in savings in retirement.”
Hopefully, a well-designed retirement plan, supported by a diversified portfolio, helps to alleviate some of these concerns. As we tell our clients, “We can’t tell you not to worry. We can only say there is no need.” If you haven’t done so already, please contact us for an initial plan or an update to the current one.
· That hurts. In 2013, Welsh Computer Scientist James Howells inadvertently lost a hard drive containing 8,000 Bitcoin, which ultimately ended up in a landfill. Now, after years of pleading with town officials to excavate, Howells has come up with the idea of simply purchasing the site and then excavating. It remains to be seen how this ultimately plays out. However, what is known is those Bitcoin are now worth approximately $840,000,000! (Source, New York Times)
It’s The Economy…”
· The Conference Board reported that its U.S. Index of Leading Economic Indicators fell 0.1% during May after declining 1.4% in April and by 2.7% over the trailing six months. “The LEI for the US fell again in May, but only marginally. The recovery of stock prices after the April drop was the main positive contributor to the index. However, consumers’ pessimism, persistently weak new orders in manufacturing, a second consecutive month of rising initial claims for unemployment insurance, and a decline in housing permits weighed on the Index, leading to May’s overall decline,” this according to Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at the Conference Board.
· Housing Starts slumped 9.8% or by 136,000 to a seasonally adjusted annualized rate (SAAR) of 1,256,000 during May as compared to 1,392,000 in April (-4.6% y/y). Of note is the fact that according to the U.S. Census Bureau there must be approximately 350,000 housing starts per year to replace those lost to natural causes, man-induced causes or by the growing U.S. population. During May, Single-family housing starts rose 0.2% or 4,000 to 924,000 from 920,000 (-7.3% y/y). Meanwhile Multifamily housing starts plunged 29.7% to 332,000 in May (4.1% y/y) from 472,000 during April. Building Permits, a key barometer for future starts, fell 29,000 to 1,393,000 in May as compared to April (-1.0% y/y). (Source, U.S. Census Bureau)
· Retail Sales slipped 0.9% during May (3.3% y/y), after falling 0.1% in April. Spending on Motor Vehicle & Parts fell 3.5% during May (2.5% y/y) after falling 0.6% in April. Retail Sales Excluding Motor Vehicles & Parts fell 0.3% (3.5% y/y). Two key components of this report, Sales at Gasoline Stations fell 2.0% during May (-6.9% y/y) whereas Food Services and Drinking Place Sales fell 0.9% during May (6.9% y/y) after rising 0.8% in April. (Source, U.S. Census Bureau)
· Industrial Production, a measure of strength in the manufacturing, factory and utility sectors, fell 0.2% during May (0.6% y/y), after rising 0.1% during April. Capacity Utilization fell to 77.4% during May from 77.7% during April and from 78.1% one year ago. Manufacturing Capacity held at 76.7% during May when compared to April and versus 77.3% one year ago. (Source, U.S. Federal Reserve)
· U.S. Export Prices fell 0.9% during May (1.7% y/y), after rising 0.1% during April. Import Prices were unchanged in May (0.2% y/y) after rising 0.1% during April. Agricultural Export Prices rose 0.2% during May (1.8% y/y), after rising 0.4% during April. Non-Agricultural Export Prices fell 1.0% during May (1.7% y/y), after sliding 0.1% during April. (Source, U.S. Bureau of Labor Statistics)
Economic Reports scheduled to be released this week include the following: on Tuesday, May Retail Sales, May Industrial Production, May Capacity Utilization and April Business Inventories; on Wednesday, May Housing Starts; on Thursday, the Weekly Report of Initial Claims for Unemployment Benefits; and, on Friday, the May Index of Leading Economic Indicators.
Q1-2025 Earnings Season Has Begun To Wind Down. Nonetheless, several companies of note are scheduled to report, to include Lennar (LEN), Jabil (JBL), La-Z-Boy (LZB), CarMax (KMX), Darden Restaurants (DRI), Accenture (ACN) and Kroger (KR).