The Week that Was.
Robert R. Fragnito
Chief Operating Officer | Financial Advisor | Portfolio Manager at MCF Capital Management, LLC
U.S. stocks traded lower heading into the close on Friday as major indexes are poised to finish in negative territory for the week.???
Daily Market Commentary is coming in a little early and abbreviated on Friday, but we look forward to returning to our normal format next week.
Investors head into the weekend with a sense of uncertainty as the S&P 500 is poised to finish its worst week since the failure of SVB bank in March. The tech-heavy Nasdaq will likely break its longest winning streak since March of 2019, while the Dow Jones is set to close its fifth daily decline marking its longest losing stretch since May 25.
Multiple global central banks delivered a slew of rate hikes this week as traders begin to question the strength of the global economy. With the exception of the U.S. Federal Reserve, the central banks of Australia, Canada, Norway, Turkey, Switzerland, and the United Kingdom raised rates in June.
Friday’s data releases did little to boost confidence in the economic strength of the U.S. and Europe. According to a flash purchasing managers index by the HCOB, business activity in the eurozone slowed in June. Meanwhile, S&P Global found June private sector activity expanded slightly in the eurozone.
For the U.S., the S&P Global services index showed a slight decline to 54.1 in June from 54.9 in May, marking a two-month low. The U.S. manufacturing index remained in contraction territory at 46.3 from prior 48.4 print, the index dropped to a five-month low. The two preliminary readings presented a slowing picture for the U.S. economy.
Bond markets in Europe and the U.S. rallied as yields fell in response to rate hikes in the eurozone and rising expectations of more hikes on both sides of the Atlantic. Fed futures traders, at last check, still appear to be resolved that the U.S. Federal Reserve will not deliver any additional rate hikes for the rest of 2023.
Looking Ahead
It was a week to remember, and investors have a lot to ponder heading into the weekend. The choppiness we witnessed in the markets this week reflects uncertainty over the potential impacts of continued tightening by global central banks.
Until a few days ago, markets bolstered their expectations that rate hikes were all but finished, this was particularly the case for the U.S. Federal Reserve. The heavy slew of global central banks delivering surprise hikes or higher increases than expected changed future trading dynamics significantly. ??
For this reason, future data releases on inflation and economic activity will be critical. We should expect these data to be a key driver of market volatility in the weeks ahead.
Has the rally come to an end? We believe so, at least for the coming weeks anyway. Consequently, we are maintaining our strategically defensive posture and may move to begin hedging our equity exposure accordingly, but this is an evolving strategy.
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Next week, investors will look towards the important release of the Fed’ favored inflation gauge, the PCE Deflator. The results of this data should offer some significant clarity on where the Fed is headed. Judging by this week’s commentary from Fed officials, absent of the PCE, rates seem poised to move higher in the U.S.
Stay Tuned! ?
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MCF Capital Management, LLC
Data Driven Portfolio Management & Financial Planning
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MCF Capital Management, LLC is an independent, family-run, financial advisory firm that manages investment portfolios for individuals and businesses through Quantitative Market Data Analysis.
THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?
???SOURCES:?MarketWatch, Investing.com, CNBC, Dow Jones Newswires