July 4th-Halftime Report
Did bearish calls by many strategists or retired billionaire hedge fund managers in the second half of 2022 or first half of 2023 keep you out of the markets? Keep you sidelined? Did talk of “retesting” or “breaking” to new lows in late 2022, when volatility was high, push you and your current advisor to change your allocation model to lower your equity exposure based on emotions? Give us a call, at 281-800-9127, we have a better way.
With the first half of 2023 in the books here are the numbers. The S&P 500 gained +8.3% in the second quarter and rose over +15% in 2023. The growth and tech heavy Nasdaq rebounded the most of the major indexes gaining nearly +13% in the second quarter and almost +32% year to date. The value biased and higher dividend Dow index rose the least in the second quarter +3.4% and 3.8% for the year.
The S&P 500 index rose + 2.3% last week, increasing the market benchmark’s June increase to +6.5% as investors were encouraged by data showing stronger-than-expected US economic growth. The S&P 500 ended last Friday’s session at 4,450, up from the prior Friday’s closing level of 4,348. This was a new 52-week intraday high on Friday. All S&P 500 sectors rose last week for the first time in months. Apple ended the quarter with a $3 trillion market cap. It’s the only company ever to hit that milestone, and while it reached that value once before, this was the first time it closed there.
2023’s worst groups led last week’s rally. The real estate sector had the largest percentage increase, up +5%, followed by a +4.8% gain in energy, a +4% rise in materials and a +3.9% increase in industrials. Other sectors up by more than +2% included technology, financials, and consumer discretionary. Communication services rose the least, +0.4%.
The gainers in real estate included Ventas (VTR), which received an investment rating upgrade last Friday to strong buy from outperform from Raymond James. Shares of the health care real estate investment trust rose +6.3%. The energy group rose as natural gas and crude futures also posted weekly gains.
The small gain in communication services came as the sector was limited by a -2.2% drop in the shares of Alphabet (GOOGL) amid investment rating downgrades from analysts at Bernstein as well as UBS.
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Two topics we had client questions on last week we wanted to address.
- Current PCE inflation data has been decelerating sharply in the 1h23, however ex-food and energy, the number remains flattish. How might this affect the Fed’s thinking? The Fed continues to disregard much of the leading-edge inflation data across the goods sector, instead choosing to focus almost solely on “core” inflation, which is largely wages, housing, and service driven. Expect them to continue this rhetoric during the heat of summer as the inflation comps gets more difficult YTY post July. They are looking to “right” their mistakes of 2020 and 2021. This is a great likely excuse for a normal summer pullback in the 3rd
- President Bidens student loan forgiveness program was rightly ruled unconstitutional by the Supreme Court as the purse strings of the US taxpayer remain job of Congress not the executive branch. This should restart student loan repayments shortly. How might this affect the economy? This should cause an incremental headwind in consumer spending in the late 2h23 and 2024 which might hurt some consumer discretionary stocks at the margin, however most US consumer spending is job dependent, and the market for employment remains strong. Recall, loan payments were being made from 2010-2019 and the economy and markets survived.
Click Here to Watch The Oak Harvest Weekly Stock Talk: July 4th – Where we Stand United after the First Half Rally
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