Weekend Update, July 22nd, 2024
Index, Sector and Asset Performance
Global equities had their worst week since April selling off -2.1% on the week led by selling and losses in Technology stocks and the “momentum” price factor. The S&P 500 ended last week down -2.0%, but it’s still up over +15.4%. Yields rose last week on stronger U.S. economic data and bets on a Trump win, with the 10-year yield rising six bps to 4.24%. The 2-Year US Treasury yields closed the week at 4.51%, as Fed speakers indicated that the latest economic data improved their confidence in the US return to target inflation rates of 2%.
On Sunday July 21st, President Biden took what was already an uncertain election cycle to a higher level by dropping out of the presidential race. Not since Sunday, March 31, 1968; when LBJ surprised voters, has an acting President withdrawn from an election. Given weekend news, Vice President Harris should be viewed as the favorite for the DNC nomination.
Equity markets are now pricing a near 100% probability that the first Fed rate cut will take place in September. With the weaker CPI data July 11th, rotations into the Russell 2000 over the past month have produced a +9% rally in this index.
The Russell 2000 ended +1.7% higher, outperforming the Nasdaq by over 5.75% on the week.
Economic Indicators and Earnings Commentary
The spot VIX, volatility index, closed at 16.5 last Friday, its highest close since April 22nd.
The week’s key economic release is Q2 real GDP on Thursday. Other data this week include consumer spending, business investment, and home sales fared at the end of the quarter. Most economists expect growth to remain in the soft-landing sweet spot through the second half of the year. Our team is taking it one month at a time.
On the back of the failed assassination attempt on former President Trump and subsequent dropping out of the race, prediction market odds shifted even higher in favor of a Trump re-election this November. Harris’ prediction market-implied odds of winning the Democratic nomination stood at 80% following the news. The odds of a Washington DC, GOP sweep dropped to around 41%.
126 stocks in the S&P 500 are due to report including: GOOGL, VZ, T, V, IBM, CMG, COF, RJF, NDAQ, GE, GEV, TSLA, GM, F, RXN, RSG, LHX, UHS, EW, ABBV, IQV, VLO, CL, KDP, KO, MMM
Global Market Trends/Commodities/Currencies
Stocks were weak across the world. What began with a rotation out of tech stocks and into smaller cap and pro-cyclical corners of the market, turned into a broader risk-off market, with ‘defensive’ assets, Healthcare, Real Estate, Utilities, and Bonds, outperforming last week.
Commodity prices fell last week. The economic slowdown in China and softening labor market conditions in the US increased investor concerns towards oil demand. WTI and Brent Crude closed the week at $80.13 and $82.63/bbl.
OHFG Exclusive Data and Charts:
Oak Harvest Weekly Stock Talk: Russell 2000 – “Rotation Nation? Or Little Shop of Horrors?”
