Markets traded in a narrow range during the second half of June. June 16th saw a rare phenomenon, a “quadruple witching” where four types of options and futures contracts expire on the same day. Add in a quarterly rebalancing of indexes and trading volume was expected to be extraordinarily high.1 Despite the hype, markets closed modestly down.
On the economic front, things still remain positive. While official numbers are yet to be released, preliminary numbers suggest that the U.S. Economy likely grew at 2% for the second quarter of 2023.2 Most significantly, the continued growth of the economy proves we are not in a recession, which seemed like a foregone conclusion a few months ago.
How have we avoided a recession so far? The labor market continues to be extremely tight. Although job openings are dropping, at the end of April,10.1 million openings remained. For context, March 2022 saw a peak of 12 million– while the pre-pandemic peak of January 2020 was 7.2 million. Furthermore, while there has been an uptick in initial unemployment claims, continuing claims numbers remain low suggesting that laid-off workers are able to find alternative employment quickly. 3
Inflation continues to trend downward, although not as quickly as the Federal Reserve (the Fed) would like. The Consumer Price Index (CPI) peaked at 9.1% in June of 2022; since then it has fallen for the last 11 consecutive months, landing at 4% for May 2023.
Challenges certainly remain on the horizon. We are currently tracking the commercial real estate market (more employees working from home means more empty offices and more online shopping means fewer shoppers at malls) and the relative strength of regional banks (which tend to be more vulnerable to current economic trends).
However, it is nice to take a moment to look back over the past 6 months and remark, “Hey, things aren’t as bad as we predicted them to be!” In fact, things remain pretty good.
Reviewing returns for the second half of June, the markets were essentially flat. As of the market close on June 30th, the Dow was down less than a point, the S&P 500 gained 24 points (.55%) and the NASDAQ Composite Index (NASDAQ) rose 5 points (.04%).
1 www.cnbc.com “S&P 500, NASDAQ rally for sixth straight day as traders hope Fed’s rate-hiking cycle is nearly over” June 15, 2023
2, 3 “Waiting for a Negative” Dr. David Kelly June 27, 2023
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