Bulled Up Pre-Fed
Last week’s debt ceiling deal, the technical start of a new bull market (20% movement from October’s lows) and the excitement about the rise of artificial intelligence all pushed markets to highs for the year in advance of next week’s Fed meeting.
For the week, the S&P 500 gained 0.46% with 0.17% coming by day and 0.29% by night. ? Small cap performance was even stronger, gaining 1.63% for the week.? The gains came entirely in the day sessions (up 2.46%) while the nights were down -0.81%.
Exposure. Night. Day. Buy and Hold.
Large Cap 0.29% 0.17% 0.46%
Small Cap -0.81% 2.46% 1.63%
Monday - Equity markets started the week off down with the S&P 500 off by 0.20% and the Russell 2000 down 1.32%
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Tuesday - Major U.S. stock indexes opened lower but eventually were up to recover the prior day’s losses. While Large caps cautiously wavered between small gains and losses, Small caps surged, gaining 3% during the day session and posting 2.7% for the day while the S&P 500 was up 0.2%. As the market headed up, the VIX traded below 14 (the lowest level since February 2020).
Wednesday - Stocks opened higher but declined following the news of an unexpected rate hike from The Bank of Canada with U.S. bond yields subsequently increasing as a result of the action taken by our neighbors up north. Small caps continued Tuesday’s rally with the Russell 2000 gaining 1.8%, suggesting resilience in the economy.
Thursday -The S&P 500 entered a bull market as investors digested fresh economic data showing larger than expected jobless claims and a sense of what that might mean for next week’s Fed rate decision. While Small caps lost some momentum from earlier in the week and the Russell 2000 dropped 0.4% on the day, the S&P 500 gained 0.6% (more than 20% up since October 2022 lows)
Friday - Markets opened strongly but backed off as the day progressed, ending the day with a respectable large cap gain of 0.11%.? The small cap juggernaut of late pulled back -0.8%.? A prominent part of the narrative has been that strategists have been raising year end equity targets lately.?
Next week - Next Week is pivotal as the Fed meets Tues and Wed and as they receive important data points (CPI Tuesday, PPI Wednesday) right in the middle of those meetings.? The markets are pricing in a 71% chance of the Fed pausing according to the CME FedWatch Tool but there is definitely substantial uncertainty around their actions and their statements.? With the current sub-14 VIX level suggesting calm in spite of this Fed uncertainty, next week will be fascinating.