Monthly Market Update – June 2023

By Simmons Investment Advisors on July 1, 2023

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Headlines From Last Month:

• The Debt Ceiling crisis was averted as a deal was reached at the beginning of the month, 2 days ahead of the deadline:
  • It was increased to $31.4 trillion, via the Fiscal Responsibility Act of 2023.
  • The federal government’s spending is restricted through January 1, 2025 (just after the November 2024 presidential election), giving lawmakers budget targets for the next 2 years.
• The Consumer Price Index
  • Dropped from 4.9% to 4.0% (versus the expected decline to 4.1%), the 11th consecutive month of decelerating inflation.
  • This is the slowest annual pace of inflation in more than two years.
• The Federal Reserve:
  • Left its benchmark interest rate target range at 5.00%-5.25%, the first pause since the Fed began raising rates in March 2022.
  • Fed Chair Powel maintained his hawkish tone, signaling the plan for two more rate hikes before the end of the year.
  • The market is pricing in another increase at the next FOMC meeting in July.
• Employment/Unemployment:
  • Nonfarm payrolls rose 339K in May, much better than expected, sparking a 700-point rally for the Dow the day the data was released.
  • Unemployment rate rose to 3.7%, vs. a 3.5% estimate.
• The S&P 500 and US equities:
  • Broke out of its narrow 6-month trading range, rally through the 4,200 level, which was the top part of that range.
  • It officially entered a bull market mid-month, up 20% (at that point) from the October 12, 2022 low.
  • It had spent almost 250 days in a bear market, the longest bear market since 1948.
  • The S&P 500 is now just 7% from its all-time high, set back in late 2021.
  • The Dow is 6.5% from its peak, and the Nasdaq is 14% from its high, despite the huge rally so far this year.
  • Since last October, US stocks have brushed off regional bank failures, fears of a US recession and further interest rate increases from Central Banks across the globe.
  • Markets have focused on the potential for large productivity gains related to artificial intelligence and improving inflation numbers.
  • The technology focused Nasdaq has been in bull market since March, now up 35% from its December 28, 2022 low.

Equity market performance: Stocks rallied across the board last month:

• June 2023 Performance:
  • Dow rose 4.56%
  • S&P 500 rallied 6.47%
  • Nasdaq added another 6.59%
• Year to date thru June 30th, 2023:
  • Dow is up 3.80%
  • S&P 500 is up 15.91%
  • Nasdaq is up 33.76%

US Fixed Income

US Treasury yields rose in June, ending the month yielding around:

• 5.40% (1-year)
• 4.95% (2-year)
• 3.85% (10-year)

As a point of reference, at May month-end, yields were at:

• 5.20% (1-year)
• 4.40% (2-year)
• 3.65% (10-year)

Regards,

Mike & Steve