The Week in Review: 5/20/2024

“The best way to predict the future is to invent it.”
Alan Kay

Good Morning,

Fran & I were in Park City, Utah last week attending our Raymond James President’s Club trip at the Montage, Deer Valley. Temps were in the 30s in the morning and mid 60s in the afternoons.

The weather was breathtaking, and RJ always goes over the top on these annual trips!!

Last week gave us some “cooler” inflation numbers and subsequently new all-time highs in most of the indices.

CPI came in at 3.6% YoY, down from 3.8%, and there were buyers!

Most importantly, these CPI numbers suggest a resumption of the inflationary decline.

Now market participants are looking at an 80% probability of a September rate cut by the Fed.

Of course, we have been looking for a rate cut all year.

We find ourselves in a conundrum… as we want a “soft landing” and lower inflation, but we also don’t want to destroy the economy, which has remained robust. This is being referred to as “Goldilocks”.

Not too hot, and not too cold.

Inflation is absolutely receding (remember 9.1% not too long ago?) … and this CPI report shows that the downtrend has resumed after a pause, yet inflation remains considerably above the Fed target of 2%.

Market momentum is also robust… and it seems the path of least resistance is up, because earnings are good.

This earnings season will soon be ending with 93% of S&P 500 companies reporting so far. Of those companies, the blended year-over-year earnings growth rate is 5.7% (Source: Factset).

Market Snapshot…

• Oil Prices - Oil prices notched their first weekly gain as demands from China and the U.S. bolstered hopes for higher demand. West Texas Intermediate crude added 83 cents, 1.05%, to $80.06 a barrel, while Brent crude futures gained 71 cents, or 0.85%, to $83.98 a barrel.
• Gold - Gold prices aided by China’s stimulus measures, looked poised to clock their second consecutive weekly gain on Friday on renewed hopes for U.S. interest rate cuts. Spot Gold rose 1.3% to $2,407.65 per ounce. U.S. gold futures settled up 1.2% to $2,412.10. Silver finished the week at $31.259.
• U.S. Dollar - The dollar traded little changed against major currencies on Friday as market speculation continues to swirl about the timing of Federal Reserve rate cuts. The dollar index, fell 0.03% at 104.46. Euro/US$ exchange rate is now 1.088.
• U.S. Treasury Rates - U.S. Treasury yields rose on Friday as investors considered the state of the economy after digesting the week’s economic data. The U.S. 10-year Treasury yield was up more than 4 basis points at 4.42%.
• Asian shares were up in overnight trading.
• European markets are trading higher.
• Domestic markets are trading higher again this morning.

Quite a bit of Fedspeak today with Governors Bostic, Barr/Waller, Jefferson, and Mester all sharing prepared comments. We don’t anticipate anything dynamic or concerning, but one never knows?

This week will be relatively light on the economic front. Aside from the plethora of FOMC member speeches, we'll also receive April’s New and Existing Home Sales on Wednesday and Thursday, respectively, and preliminary Manufacturing and Services PMI also on Thursday.

We have a 3-day weekend coming so activity could lighten as the week goes by. Next Monday the markets are closed for Memorial Day.

Have a great week!!

The opinions expressed herein are those of Michael Hilger and not necessarily those of Raymond James & Associates, Inc., and are subject to change without notice. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

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