Stock markets were UP last week to record highs as investors discounted the future impacts of tariffs and embraced the Iran-Israel cease fire. Bond markets also rose, pushing yields down. Oil prices have fallen on hopes that the Middle East has settled down. Some analysts are even expecting a Federal Reserve rate cut! (I predict NOT in the near future.) Optimism all around! Is it warranted? You tell me. There’s a lot of pending situations in the world that might go either way, but as Axios pointed out today, “Wall Street is largely post-tariff. The market is a forward-looking machine, and it’s already priced in better-than-expected trade deals before they are signed.”
Still, those tariffs are looming. We expect to see repercussions from them beginning next month (which starts tomorrow). So far, importers and retailers have kept the price hikes under control, but that can’t be forever. When it comes to shutting down a business, or raising prices for consumers, you know what is going to happen.
The Nasdaq Composite Index and the S&P 500 closed at new highs on Friday, by a hair. The Dow Jones Industrial Average also closed higher, but not at a record. Interestingly, those record highs only happened if you valued the indices in dollars. The dollar has weakened to a point where OTHER currencies, which are stronger, are not valuing the indices at record highs. The Euro, which was worth $1.03 in January, is now worth $1.17.
Foreign shoppers are finding that their money goes a lot further when they buy American goods than it used to. Of course, that depends on the state of reciprocal tariffs in their own countries. A weak dollar benefits American companies that operate abroad and then convert their income to dollars to bring it home. Picture McDonald’s in Europe. In January you could buy a cheeseburger for one Euro and it would take $1.03 out of your pocket. Today that cheeseburger costs you $1.17 (plus significant airfare).
Too much optimism? It depends on whom you ask. To quote Axios again, “While 78% of money managers expect the global economy to improve in the back half of the year [which, again, begins tomorrow], per Teneo, only 43% of CFOs agree.”
The Personal Consumption Expenditures price index (carefully watched by the Fed) was released last week and showed prices up 0.1% month-over-month. Core prices, which exclude food and energy, rose 0.2%, and 2.7% year-over-year. Fed Chairman Jerome Powell told lawmakers in Congress that “recent economic data would have likely justified continuing to cut interest rates if not for concerns that higher tariffs might derail the Fed’s fight against inflation.” (Wall Street Journal)
Meanwhile, consumer spending is sliding, with purchases by 18- to – 24-year-olds down 13% between January and April, according to market-research firm Circana. This is related to the Conference Board’s consumer-confidence index, which fell from 98.4 in May to 93 in June. But the University of Michigan’s index of consumer-sentiment rose from 52.2 to 60.7 over the same period. Which is it? For Americans who are feeling that the economy is shaky, NOT spending is an appropriate response. So where are those people who think the economy is great, and why aren’t they shopping?
An analysis of unemployment-benefits data shows that initial claims by newly laid-off workers declined for the week ending on June 14th, but continuing claims increased, showing that out-of-work people are staying off work for longer. The data may imply that companies are holding off on firing AND hiring. We will receive the June jobs report on Thursday of this week. Friday is the July 4th holiday. Our office will close at 1:00 p.m. on Thursday and reopen Monday morning, July 7th, just like American markets.
A new report published in Nature Chemistry claims that a genetically modified strain of E.coli can convert plastic into acetaminophen. What? Acetaminophen is the active ingredient in Tylenol. Traditionally, it has been manufactured from chemicals found in crude oil, but it took less than 24 hours for this new modified E coli strain to convert 92% of a broken-down plastic water bottle into acetaminophen. I’m all for reducing plastic waste, but this news makes me want to avoid Tylenol altogether. Next, you’ll be telling me that aspirin is made from tree bark.
For the week ending on June 27th, the S&P 500 finished at 6,173, the Nasdaq Composite Index at 20,273, and the Dow at 43,819. The yield on the ten-year Treasury was lower at 4.283%. U.S. crude oil was also lower at $65.34 per barrel. N.Y. gold cost $3,279.28 per ounce. One Euro was worth $1.17.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Axios, The Hustle, Business Insider, Bloomberg, Barron’s, MarketWatch, Morning Brew, The Wall Street Journal, The New York Times, The Washington Post, USA Today, Reuters, The Associated Press, CNN, CNBC, Yahoo Finance, and 1440 Digest. If you have questions, please call us at 203.458.5220 or reply to this email to reach me, Liz Cook. Thank you for reading!
The movie Jaws is now 50 years old. I bet you can still hear the shark coming.