After a slew of economic numbers and the Federal Reserve meeting the week of June 13th. What does this mean? The May consumer price index (CPI) came in at 4% year over year and down from the 8% print that we saw in June of 2022. We also had an encouraging May producer price index (PPI) number which showed producer prices rose 1.2% from May of 2022. This was the lowest PPI since 2020. Finally, the Federal Reserve decided to pause raising the fed funds rate. This is the first pause since they began raising interest rates in March of 2022 (Why Is Inflation Finally Falling In The U.S.? – Forbes Advisor). I think all this data points to softening and falling prices in general. There is a high probability that the Fed has finished raising rates. This is positive for growth companies such as technology and biotech along with long dated bonds of all flavors. I know the Fed talked about possibly raising rates in July. However, over the past 20 years, once the Fed stops/pauses with interest rate hikes the next move is to lower interest rates. Markets are forward looking and have been anticipating inflation to move lower and the Fed to stop raising interest rates.
So far, this year looks completely opposite to 2022. Last year, energy stocks were leading the market, technology stocks got hammered and bond prices were falling off a cliff. One year later, it is the complete opposite. A true 180 degree move with technology running away to the upside, energy lagging and bond prices firming up.
We are now in the early stages of the summer months and activity is slowing down. This may present a good time to reposition portfolios. I continue to believe that the U.S. equity markets will be higher by year end and 2 years from now. There is always a multitude of things to worry about and reasons stock prices will not and cannot go higher. I will remind you that it has NEVER been a good idea to bet against the United State of America.
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