June 2023 in Review

by Daniel Zeigler, CFP®, CMFC®, Senior Portfolio Manager

 

 

Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today I wanted to take a few minutes to give you an update on the markets for the month of June.

 

Market Returns for June

Stocks extended their gains for the year in the month of June, as we began to see the overall market show signs of broadening out. The technology-heavy NASDAQ index was up around 6% for the month of June as the index closed out its best first half in 40 years, powered by Apple’s rally to a $3 trillion dollar company and Nvidia’s boom higher. The S&P 500 was up over 6% for the month, as well, and is now up close to 16% for the year. Small-cap companies finally decided to join the stock rally in June, as well, as the Russell 2000 index was up over 8% for the month.

The overall bond market was flat for the month; however, interest rates have been trending higher recently. The 10-year Treasury is back above 3.80% and the 2-year Treasury is getting closer to 5%.

 

GDP Update:

1st quarter economic growth was revised higher from 1.3% to 2%. The upward revision helps undercut widespread expectations that the U.S. is heading toward a recession. Household spending, the engine of the U.S. economy, rose by 4.2%, which was the biggest increase in nearly two years. 2nd quarter estimates for GDP have also been moving higher, with the latest economists predicting a 2.2% growth rate for the economy.

 

Federal Reserve Forecast:

At the June 14th Federal Reserve meeting, the committee agreed to keep rates unchanged, however, since the meeting, Powell expects more Fed rate hikes ahead as the inflation fight ‘has a long way to go.’ There is currently an 84% chance that the Fed will increase interest rates by 0.25% at their next meeting on July 26th.* The market is also no longer expecting the Fed to cut interest rates this year. On Friday, the U.S. employment report is expected to see jobs grow by 240,000 and for the unemployment rate to move down slightly to 3.6%.

 

Earnings Season:

Corporate earnings for the 2nd quarter will begin reporting in a few weeks. The expectations are for overall profits to show a decline of about 6.8%. However, analysts are expecting earnings growth to resume in the 4th quarter for a growth rate of 7.9%.

 

Outlook:

The consumer continues to be resilient, as shown in the strong revision to the 1st quarter GDP. Inflation continues to come down, as the Fed’s key inflation measure showed prices rose just 0.3% in May. However, given the strong start to the 1st half of the year, the market may be due for a pause or even a slight pullback in the summer months, as the Fed looks to raise rates a few more times.

As always, thanks for joining me for this month’s market update and if you have any questions about investments, financial planning, retirement projections, or estate planning, please do not hesitate to give us a call. Also, be sure to check out our 3rd quarter newsletter for additional thoughts on the markets. Hope everyone has a great 4th of July!

 

*Source: CME FedWatch Tool; data as of 7/3/2023