June 14 – June 18 Week in Review
Investors adjusted their positioning following the Federal Reserve’s meeting as equity prices fell, growth stocks returned to favor and intermediate-term interest rates rose. The S&P 500 declined - 1.9%, its worst weekly showing since February. The Dow Jones Industrial Average was down -3.5%, while the Russell 2000 retreated by an even greater -4.2%. The NASDAQ stood out as the top performing major index having lost a mere -0.3%.
On Wednesday, the Federal Reserve concluded its meeting with no change to its policies. Forecasts submitted by committee members, however, indicated the potential for two rate increases in 2023, earlier than prior expectations. The market reacted by pushing interest rates higher, sending bond prices lower, while stock prices rolled over. As the week progressed, the rebound in rates faded and stock investors made a sizable shift away from economically cyclical stocks, toward those with higher growth prospects.
For the week, growth stocks outperformed value by a sizable 4.6%. This shift in sentiment resulted in a modest gain for the technology sector, with consumer discretionary not far behind. Alternatively, materials, financials, and energy were all down 5% or more. At the stock level, money center bank stocks fell early in the week after multiple firms indicated that trading volumes would fall from the levels experience during 2020. Ford’s price continued its ascent after the company said that it expected second quarter earnings to exceed the company’s forecast. Oracle shares slumped after its guidance was not in line with expectations.
In other economic news, retail spending pulled back -1.3% in May, as consumers shifted their spending priorities toward services. Of note, casino spending was up 17%. Input prices continued to rise higher, as the Producer Price Index (PPI) increased 0.7% from the prior month.
The yield curve flattened as investors repositioned following the revised forecasts from the Fed. The yield on the 10-year Treasury declined a mere basis point to 1.44% after being as high as 1.58% mid-week. Yields on intermediate term maturities rose with 2-year and 5-year yields up 11 and 15 basis points respectively. The 2-year yield concluded the week at 0.26%, its highest level since April of 2020.
In other markets, Oil lifted 1.0% to $71.64 as the commodity hit its highest price in two years. The dollar rallied in response to expectations for interest rate increases occurring sooner than previously expected. On the week it appreciated 2.0%, to close at 92.35. The price of gold plummeted -5.8% to $1,768 in response to a stronger dollar. Commodities reset as well, with copper falling -8.4%, corn down -7.1% and lumber continuing to reverse course slumping -15.2%. Volatility increased as the CBOE Volatility Index (VIX) finished at 20.70, up over 32% for the week.
June 21 – June 25 Economic Calendar
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. Current and future portfolio holdings are subject to risk. Risks may include interest-rate risk, market risk, inflation risk, deflation risk, currency risk, reinvestment risk, business risk, liquidity risk, financial risk, and cybersecurity risk. These risks are more fully described in Telemus Capital's Firm Brochure (Part 2A of Form ADV), which is available upon request. Telemus Capital does not guarantee the results of any investments. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, and may lose value.
The S&P 500 index includes 500 leading companies in the US and is widely regarded as the best single gauge of large-cap US equities. The Dow Jones Industrial Average (DJIA) is a widely-watched benchmark index in the U.S. for blue-chip stocks; it is a price-weighted index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange and the NASDAQ. The Nasdaq Composite Index is a large market-cap-weighted index of more than 2,500 stocks, American depositary receipts (ADRs), and real estate investment trusts (REITs), among others. The Russell 2000 index measures the performance of approximately 2,000 smallest-cap American companies in the Russell 3000 Index. The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services. The CBOE Volatility Index (VIX) is a real-time index that represents the market's expectations for the relative strength of near-term price changes of the S&P 500 index (SPX). An index is not a security in which an investment can be made, as they are unmanaged vehicles that serve as market indicators only and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. It should not be assumed that portfolio holdings will correspond directly to the comparative index benchmark shown above. The holdings and performance of Telemus client accounts may vary widely from those of the presented indices. Advisory services are only offered to clients or prospective clients where Telemus and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Telemus unless a client service agreement is in place.