Market Commentary For the week of June 24, 2024

ECONOMIC REVIEW

• Retail sales showed a modest 0.1% gain in May, albeit at a softer pace than the consensus estimate of 0.3%.
  • April’s print was revised to show a decline of -0.2% instead of no change as initially reported.
  • Gas station receipts fell 2.2%, a product of lower oil prices, though that’s good news for consumers.
  • Core retail sales, which exclude autos and gasoline, matched the headline, rising 0.1% though falling short of expectations.
  • Compared to a year ago, retail sales were up 2.3%.
• Construction of new homes in the U.S. fell 5.5% to an annualized rate of 1.277 million in May, well below the forecast of 1.37 million.
  • Building permits, a proxy for future construction, fell by 3.8% to a seasonally adjusted annual rate of

1.386 million.

• Compared to a year ago, the start rate was 19.3%, while permits for single-family and multi-family homes were down 2.9% and 28.8%, respectively.
• The Conference Board Leading Economic Index (LEI) for the U.S. decreased by 0.5% in May 2024 to 101.2

How do retail sales, home construction, and LEI impact you?

• Consumer spending accounts for 70% of US GDP, and May’s retail sales report, accompanied by a downwardly revised April, signals a strained consumer. A pullback in spending on food services also hints that high interest rates are biting into consumers’ pockets. After strong early-year prints, stalling figures point toward declining consumer sentiment and a loosening economy.
• Stung by increasing costs, builders have slowed down on all types of homes across most of the nation, with housing starts falling to their lowest since June 2020, further limiting already weak housing stock.
• LEI declined for the third consecutive month, though it did not signal a recession in May as its six-month growth rate trended less negative.

LOOK FORWARD

• Next week, all eyes will be on the release of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index. Also, the third estimate of first-quarter GDP and the University of Michigan Index of Consumer Sentiment appear on the docket.

How do inflation data, GDP, and consumer confidence impact you?

• Market participants will seek evidence of whether the economy and inflation are slowing sufficiently enough to allow the Federal Reserve to cut interest rates in the coming months.
• Inflation still far exceeds the Fed’s 2% target, but further progress on that path will be treated with great optimism.

MARKET UPDATE

Market Index Returns as of 6/21/2024	WTD	QTD	YTD	1 YR	3 YR	5 YR
S&P 500	0.63	4.34	15.36	26.60	10.48	14.99
NASDAQ	0.01	8.19	18.26	30.77	8.31	18.07
Dow Jones Industrial Average	1.50	-1.19	4.87	17.69	7.03	10.24
Russell Mid-Cap	1.00	-3.16	5.17	16.42	2.80	9.53
Russell 2000 (Small Cap)	0.80	-4.54	0.40	11.07	-2.79	6.90
MSCI EAFE (International)	0.07	-0.77	4.97	11.41	2.45	6.52
MSCI Emerging Markets	0.98	4.93	7.42	11.40	-4.39	3.16
Bloomberg Barclays US Agg Bond	-0.15	0.72	-0.07	3.39	-2.76	-0.02
Bloomberg Barclays High Yield Corp.	0.21	1.05	2.54	11.04	1.81	3.90
Bloomberg Barclays Global Agg	-0.29	-0.69	-2.76	1.14	-5.35	-1.85

OBSERVATIONS

• In the market holiday-shortened week (markets were closed Wednesday in observation of the Juneteenth holiday), the S&P 500 advanced +0.63%, delivering a third consecutive week of gains, the tech-heavy NASDAQ narrowly eked out a positive return, and the blue-chip-centric DJ Industrial Average lead major markets returning +1.50%.
• Notably, across the cap spectrum, mid-cap and small-cap equities had a strong showing, outperforming all but their domestic larger-cap value brethren, indicating a potential shift in market dynamics.
• Emerging markets were among the best-performing places in the market, returning +0.98 %. Outperforming international developed markets, which returned a mild +0.07%, and most domestic equities.
• The Bloomberg US Aggregate Bond index, a proxy for the intermediate-term investment-grade bond market, pulled back -0.15% on the week as the 10-year Treasury yield increased (bond prices move inversely to interest rates and credit spreads). Global bonds declined in tandem with domestic bond markets.
  • Less duration and interest rate-sensitive fixed income held up better, with corporate credit advancing +0.21%.

BY THE NUMBERS

• Heat Wave Scorches US East Coast as Dangerous Temperatures Expand to West: More than 100 million people across the U.S. were under heat warnings on Sunday, with cities on the East Coast bracing for record-breaking temperatures as the heat dome causing the dangerous conditions expands to the West Coast. Baltimore and Philadelphia are forecast to touch records near 100 degrees Fahrenheit (38 degrees Celsius) on Sunday, while temperatures rise into the 90s F in states like Idaho, Montana and Wyoming, as much as 15 degrees above normal for this time of year. The extreme heat will then shift to Nebraska and Kansas on Monday, the National Weather Service (NWS) said.3
• Most NBA Championships By Team: When the 2023-24 NBA season began, the Los Angeles Lakers and Boston Celtics were tied atop the NBA’s all-time championship leaderboard at 17 titles apiece. If we’re being absolutely technical, the Lakers actually won an 18th title before the Celtics did. The problem? It was for the new, In-Season Tournament championship, not a traditional end-of-season title. Well, if there was any doubt about who sits atop the all-time championships throne, it has been erased. The Celtics clinched the 2024 NBA championship on Monday night with a Game 5 win over the Mavericks to win the NBA Finals. The Lakers and Celtics alone have combined to win 35 of the total 78 championships awarded in league history or a bit less than 45%. They have a 10-title lead on every other team in the NBA, with the Warriors in third place with seven. ⁴

Reprinted with permission from BTN. Copyright © 2021 Michael A. Higley.