Weekly market Recap – July 17th

Although the economy looks like its improving and employment remains robust, most American’s feel “poorer” from the combined effects of higher food costs, higher gas prices, and higher borrowing rates.

• Small businesses, which account for 48% of total employment, are marred by a confluence of slowing demand, costly labor and rising credit costs.  
• This week’s Optimism Index remains within a decade low, reflecting concern among small business growth in a high-rate environment.

• Inflation swap prices are not necessarily an accurate predictor of future realized inflation, but it still gives some comfort to policymakers that they have declined quite a bit.
• Following the recent positive CPI and PPI data, more economists are predicting just one more rate hike in July being more of a probability.

• The headline personal consumption expenditures (PCE) deflator, the Fed’s preferred measure of inflation, was 20 bps less than May.
• With PCE under 3%, the Fed will feel more justified to pause rate hikes.

• The June CPI reports confirms that goods-price increases have moderated substantially from the large jumps in late 2021 and early 2022.
• Food/Energy prices are now negatively contributing to CPI.

• Global stocks headed for their best weekly gains since November on bets that the US monetary tightening cycle is nearing an end. 
• Most indices advanced in Asia, while Europe and US were little changed. Optimism about stronger efforts to boost the Chinese economy help boost shares in the region

• Existing home sales have bounced off recent lows that were triggered by dismal affordability and homebuyer confidence at the lowest in decades.
• Most of the current borrows are holding on mortgage loans fixed at nearly 4% below current levels, originated when rates fell to record lows, so these borrowers may never have an incentive to refinance.

• The smaller bank ETF continues to trail the broader S&P 500 in overall performance significantly. 
• The “hangover” from the springtime scare of Silicon Valley Bank is still haunting shares prices.

• Earnings estimates so far have remained subdued, and any earnings beats so far have been met with selling

• With Brazil early in the cycle for rate tightening, they have managed to stash away more reserves and shore –up their balance sheet faster.

• The decline in beat rates have has spurred a growing share of assets to move into S&P 500 ETFs that track the index more closely. 
• This year $35 Billion has moved into these types of ETFs verses thematic funds.

• So far this year, only 17% of all ETFS are beating the S&P 500.
• This is the worst performance since 2006.  
• They do however beat during tough cycles like 2022 and 2009.