Historically, June is the worst month of the year for market returns. In fact, on average June only posts growth 37% of the time.1 So far, however, June 2023 seems to be bucking that trend.
Markets started the month at a sprint. Late night on June 1st the Senate passed a bill to extend the debt ceiling for two years and create a two-year budget agreement. President Joe Biden signed the bill on June 3rd, ending the chance of a potentially cataclysmic federal default. Markets celebrated the deal on June 2nd, with the NASDAQ Composite Index (NASDAQ) and S&P 500 posting a daily gain of over 1% and the Dow Jones Industrial Average (Dow) rising over 2%.
The May jobs report (released June 2nd) showed a surprising 339,000 new positions filled. That was an increase over April’s equally surprising number of 253,000 new jobs. For context, March was a more predictable 165,000. While a strong jobs market is great for workers, it can also fuel inflation, which in turn could embolden the Federal Reserve (the Fed) to continue its policy of interest rate hikes. However, not all jobs data is rosy, as unemployment benefit applications have risen in recent weeks.
In late news, the Fed concluded its most recent regular meeting on Wednesday. While hinting that additional interest rate hikes may be necessary in the future, they chose to leave rates unchanged at present, pausing after 10 consecutive rate hikes. Playing into the Fed’s decision was a Labor Department report from Tuesday indicating Consumer Prices had increased 4% for the month of May – the smallest annual increase since March 2021.2
However, inflation data was also mixed as the less volatile Core Inflation reading is still running at 5.3%, more than double the Fed’s target of 2%.3 Markets rose again Thursday, in part as a result of the release of key economic data. In a sign that the labor market was tightening, weekly jobless claims numbers came in at 262,000 – somewhat higher than the expected 245,000. Retail sales data also showed a surprising increase of 0.3%; a modest decrease of 0.1% was expected.4
Last week marked the S&P 500’s fourth consecutive weekly increase, which also exceeded the level needed to exit the bear market it had been in since January of 2022. Since October 12, 2022, the index has risen 20% to enter bull market territory.5
Reviewing returns for the first half of June, the markets all posted strong returns. As of market close on June 15th, the Dow was up 1,500 points (4.56%), the S&P 500 rose 252 points (6.04%) and the NASDAQ Composite Index (NASDAQ) jumped up 848 points (6.55%).
1 www.horsesmouth.com “The Best Months for Stock Market Gains” June 1, 2022
2, 3 www.npr.org “Taking a Breather: Fed holds interest rates steady in patient battle against inflation” June 14, 2023
4 www.investors.com “Dow Jones Jumps As Market Shrugs Off Powell; Cava Stock Explodes On Trading Debut” June 15, 2023
5 www.jhinvestments.com “Weekly Market Recap; Week ended June 9” June 12, 2023
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