The Federal Reserve will have a rate announcement on July 31st, but no change is expected until mid-September. The S&P 500 hit new highs in July, but as of this writing, the index had a small loss for the month; there was quite a bit of rotation beneath the surface of the stock market. Bond yields remain attractive, but Fed cuts may change how cash needs to be managed.
The second quarter ended near a new closing high for the S&P 500. For the second time in a row, the index marked a new intraday high on the final trading day of the quarter. Broadly, the economy continued to grow, though the rate of change slowed for some indicators. Bond yields rose then fell on various inflation reports and shifting expectations for Fed rate cuts.
The S&P 500 rose above 5,500 for the first time this month on strength from the largest Technology stocks. Inflation readings generally improved and it will be more than a year from the last Fed hike (July) to the first Fed cut.
Stocks climbed to new highs this month after a good corporate earnings season and modest inflation reports.
After hitting an all-time high in March, the S&P 500 stock index proceeded to pull back over 5% in the first three weeks of April. As we mentioned before, 5% pullbacks happen in most years.
The first quarter ended with a new high for the S&P 500. Earnings growth expectations helped fuel the rally, which kept going despite higher interest rates. Higher rates pushed bond prices lower, resulting in a small loss for the Aggregate index, though our clients’ exposure to shorter-term corporate bonds and alternative funds typically resulted in a gain.
Positive stock momentum continued as earnings increased, inflation moderated, jobs remained strong, and interest rates remained range bound.
When will the Fed start cutting rates? The S&P 500 crossed above 5,000 for the first time, despite higher interest rates this year.
Markets are at all-time highs, GDP topped expectations, semiconductor (chip) stocks are the talk of the town, and the Fed is on hold (for now).
The fourth quarter saw year-to-date highs in stock prices, including the Dow Jones Industrial Average reaching 37,000 for the first time. The intertwined elements of lower inflation, expectations of Fed rate cuts, and lower interest rates were the primary drivers of higher stock prices and higher bond returns.