By: Dave Chenet, CFA, CAIA
| Close | Weekly return | YTD return | |
| S&P 500 | 4,505 | 2.42% | 17.37% |
| Nasdaq Composite | 14,113 | 3.32% | 34.85% |
| Russell 2,000 | 1,931.09 | 3.68% | 9.84% |
| Crude Oil | 75.27 | 2.62% | -6.22% |
| US Treasury 10yr Yield | 3.82% |
Source: YCharts, Yahoo! Finance, WSJ
Stocks Celebrate Cooling Inflation!
As we discussed in our Podcast this week (click here to view recent PCM podcasts – most recent episode available soon), markets celebrated CPI and PPI inflation numbers this week showing signs of moderation. Headline inflation moderated to 3% year-over-year, while core inflation came in at 4.83% (mostly reflecting lower energy prices since summer ’22). Small-cap stocks performed better on the week than their large-cap counterparts, extending recent outperformance (small-caps +11.7% v. large-caps +8.5% since June 1st). Markets will turn their eyes next to Q2 earnings reports. While still early in the reporting season, blended earnings for the S&P 500 show a year-over-year decline of -7.1%. If this holds, it will be the weakest quarter since Q2 2020 and the third consecutive negative quarter. Analysts are, however, expecting a rebound in earnings into year-end and for 2023 earnings to be finish the year roughly equivalent to the number posted in 2022, and 2024 to post a 10% increase in earnings. Somewhat incongruous with this estimate, however, is the continued expectation that the Federal Reserve will begin cutting interest rates in early 2024. Absent a “hard landing” recession, policy makers may be content to leave rates at currently restrictive levels. While the Fed is broadly expected to raise rates at its late-July meeting, it may yet surprise markets with a hawkish message that investors should prepare for “higher for longer.”
What We’re Reading:JPMorgan Asset’s Michele Says Global Bond Rally Is Just StartingAxios: NASDAQ 100 Index to rebalance after Magnificant Seven grow to disproportionate share
Chart of the Week:
