A lot has changed since my last market update. The market has rallied nicely YTD and last week it was declared that the Bear Market was over since the S&P 500 has rallied 20% off the October lows of last year. Today all major averages reside above their respective long, intermediate, and short-term trend lines. From a technical/trend standpoint, this is excellent.
The Fed mandate is primarily twofold: to achieve stable prices and work to maintain full employment.
Global Food inflation continues to ease. World Food and Agricultural Price continue to ease with the year over year percentage change dropping to its lowest level since 2015.
And the unemployment rate is near a record low of roughly 3.4%.
And U.S. Job openings remain elevated.
These developments suggest that there may be some leeway for the Fed to stop raising interest rates at the next meeting in June.
With all of this in mind, the recent market rally off the lows has been narrowly focused. Just 8 mega cap stocks in the S&P 500 have contributed virtually 99% of the growth of the S&P 500.
If this narrowly focused leadership were to broaden out to other lagging groups or to some of the other 492 stocks in the S&P 500 Index, we could see the major averages continue to grow nicely.
As far as the consumer, which represents 60-70% of the economy now, here is what the Wells Fargo CEO had to say.
Wells Fargo sees a strong consumer in their May data...
"...from what we see, things still are probably far stronger than we would have thought they would have been at this point in the cycle. There's still a fair amount of cash in deposit accounts. Consumer spend is holding up. Debit card spend is kind of flattish. Credit card spend for us is up roughly 10%. It's slowing slowly, which is what we would expect. But again, still, you're not seeing any meaningful declines or any acceleration of that." - Wells Fargo CEO Charles Scharf 1
So Net Net, I am optimistic about the continued improving market prospects. Remember we just came out of last year which was the worst market period since the 2007-2008 Financial Crisis so we may have room to run here. As always please call us should you ever have any questions regarding anything financial.