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Weekly Market Update (June 30, 2024)

Updated: Jun 30


HIGHLIGHTS

First half of 2024 has passed, Nasdaq and S&P500 went up 18% and 15% respectively. PCE index was flat, meaning the inflation is cooling off, which could support the Fed’s rate cut.


Election: There was the presidential debate on Thursday. Although the markets remain calm this week, markets could be volatile in the upcoming months before November’s election. A Republican sweep could see an increase in equities, higher yields and stronger dollar. A Democrat sweep could see a decline in equities and weaker dollar.


Signal: Markets are focusing on elections in the US, UK and France. We are going to have clearer pictures of growth and rate cut trajectory after the release of economic data in the coming week, including US labor market, PMIs and eurozone inflation.


USD: US dollar hit new high of the year. The strong dollar is supported by the Fed’s stance of keeping the rates higher for longer, while the central banks in other developed countries such as Europe, Swiss and Canada have started the rate cut cycle already. In short-term, USD also benefits from the political uncertainty of French elections as investors treat dollar as safe haven.

 
MARKETS

Nasdaq

17,732.60

+0.24%

S&P 500

5,460.48

-0.08%

Dow

39,118.86

-0.08%

10-Year

4.34%

+8bps

Brent

86.48

+1.66%

DXY

105.85

+0.02%

*Data as of market close. 5-day change ending on Friday.

 
VIEW FROM THE STREET

Equity

Goldman Sachs: Due to high inflation, consumers are struggling. Consumer retail businesses slow down and are expected to have double-digit decline in sales volume by year-end. Major sports clothing brands and pharmacies dropped significantly.


Morgan Stanley: The tailwind of bull equities are mainly driven by the high expected growth amid a soft-landing scenario. As the real economic growth is slower and pricing power is declining, it could be harder than expected to achieve the margin gains in second quarter.

Fixed Income

UBS: Although the Fed has often been criticized for shifting policy that is favorable to elected officials, we believe the Fed will remain independent. If the future president tries to intervene in the monetary policy, it is likely to trigger adverse market reaction. In general, the economic data is supporting the Fed to start easing later this year.


Morgan Stanley: Markets expect the median of inflation at around 3% in longer term (5-10 years). If the interest rates recouple the relationship with inflation forecasts and the Fed continues to keep its “higher for longer” approach, treasury yields could rally again.

Economy

J.P. Morgan: In the beginning of the year, the consensus was a weaker US dollar, while dollar index (DXY) went up 4.4% YTD. The consensus was based on the trade deficits, deteriorating fiscal and narrowing interest rate differential with other countries. Markets start to re-evaluate the situation. Although the fundamentals are indicating that dollar is overvalued, the higher for longer rates could support the strength of dollar in near term.


UBS: Economic growth is as important as inflation. The mandates of central banks are maintaining low inflation and steady GDP growth. 4 central banks have started their rate-cut cycle, and we believe the Fed will follow with a first cut in September, justified by the economic data of inflation, growth and job markets.

 
KNOWLEDGE TRANSFER

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DISCLOSURE

This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.



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