June Market Recap
Those who have doubted the legitimacy of this stock market rally may be starting to doubt themselves. Either that, or they have already become believers.
June delivered strong numbers across the board as the major equity benchmarks broke through technical resistance and now sit closer to their all-time highs than their mid-October lows. All three major benchmarks gained a least 4.5%.
Every one of the 11 sectors in the S&P 500 was positive last month (a far cry from May, when all but three sectors were negative). Consumer Discretionary (+12.0%), Industrials (+11.2%), and Materials (+10.8%) were all up double-digits. Utilities (+1.5%) gained the least.
Benchmark Returns: June 2023 | YTD 2023
|
Dow Jones
|
S&P 500
|
NASDAQ
|
+4.56% | +3.80%
|
+6.47% | +15.91%
|
+6.59% | +31.73%
|
|---|
The jobs report released in early June set a positive tone for the month ahead: Nearly 340,000 jobs created, twice as many as forecasted. Even with the national unemployment rate ticking higher to 3.7% (from 3.4% a month earlier), the Dow responded by gaining 700 points on June 2.
Inflation data also did its part to kickstart equities. The latest Consumer Price Index (CPI) showed 4% year-over-year inflation, down from 4.9% a month earlier. The significant drop provided the Federal Reserve with ample justification to avoid hiking interest rates following its June meeting, a decision that had been widely anticipated.
Fed Chair Jerome Powell made the pause official on June 14, but said it’s likely that “further rate increases will be appropriate this year.” Markets interpreted those comments as a suggestion we will get two additional rate hikes of 0.25% each at some point before year-end. Most prognosticators are expecting the first of those hikes to occur in late July.
The other key inflation gauge, the Personal Consumption Expenditures (PCE) index, fell only slightly. The most recent PCE data revealed 4.6% inflation in the last 12 months (down from 4.7% a month earlier).
The US economy grew more than initially estimated in the first three months of 2023. Official GDP growth in Q1 was revised to 2% annualized, considerably better than the original estimate of 1.3%. Strong consumer spending was credited for much of the upward revisions, perhaps aided by the 8.7% boost in Social Security benefits that took effect in January.
The GDP data is more evidence that the US economy is not as close to a recession as previously thought. Initial projections for Q2 GDP will be released in late July. A recession remains a very real possibility, but one that now seems more likely to occur in 2024, if at all.
10-year Treasury yields finished June at 3.82%, up from 3.64% at the end of May. A ladder of high-quality individual corporate bonds now yields better than 5% per year. Importantly, that is higher than the latest annual inflation numbers.
Small-cap stocks, as measured by the Russell 2000 index, gained nearly 8% in June. International equities performed in line with US stocks. Both Non-US Developed Markets and Emerging Market equities increased 4-5%.
Gold prices slipped 2.2%, but still returned better than 5% cumulatively in the first half of the year. The national average gasoline price at the end of June was just above $3.50 per gallon. Falling energy prices have helped curb inflation. Gas prices are down nearly 30% compared to a year ago.
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Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.
