Market Overview
Last week’s trading was marked by significant selling in global markets. While US stocks and bonds enjoyed gains, the other major asset classes experienced a decline over the five trading days concluding on June 15, according to a selection of exchange-traded products.
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Current Economic Insights
Migration policy poses risks to German chancellor’s political stability: Bloomberg
Concerns over trade war impacting global trade: NY Times
World markets and oil experience a downturn on Monday amid escalating trade tensions: Reuters
US Consumer Sentiment Index reaches a three-month high in early June: CNBC
US industrial output dipped 0.1% in May: AP
This month, the NY Fed Manufacturing Index surged to its highest level in eight months: MW
Larger corporations are capturing a greater share of the workforce: NY Times
Investment Insights
By Michael Batnick
Review via The Wall Street Journal
If there were one universally true statement, it would be this: Even the smartest investors make mistakes regularly.
The newly published book, “Big Mistakes: The Best Investors and Their Worst Investments,” by Michael Batnick, director of research at Ritholtz Wealth Management in New York, serves as a reminder that errors in investment decisions are an inherent part of the process.
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Sector Performance in Focus
As of yesterday’s close on June 14, consumer discretionary stocks have emerged as the leading sector for the year, surpassing technology stocks. Although technology shares had been at the forefront of 2018’s performance, a notable surge this month in consumer discretionary businesses has propelled this sector to the top of the rankings. Conversely, tech stocks have displayed only modest gains this June.
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Trade Policy Updates
US initiates second wave of tariffs on Chinese imports: Reuters
European Central Bank announces the end of its bond-buying program: Bloomberg
China’s economic growth is under pressure as the government restricts access to easy credit: NY Times
US retail spending saw a significant uptick of 0.8% in May, marking the largest increase in six months: Reuters
US import prices rose sharply by 0.6% in May: Reuters
Jobless claims in the US declined by 4,000 last week, reaching 218,000: MarketWatch
Business inventories in the US saw a rebound in April: MarketWatch
High-net-worth individuals control nearly half of the global wealth: Bloomberg
SEC confirms that bitcoin and ether do not qualify as securities: Yahoo Finance
GDPNow’s estimate for US Q2 growth rises to a robust +4.8%: Atlanta Fed
Upcoming Publication
Later this month, I will release my third book titled Quantitative Investment Portfolio Analytics In R: An Introduction To R For Modeling Portfolio Risk and Return. While there are numerous R books available, this one is tailored for a specific audience: those transitioning from Excel who are performing relatively sophisticated analytics on investment portfolios and encountering the limitations of spreadsheets.
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Small Cap Rally
The recent surge in the performance of small-cap stocks compared to large-cap stocks has intensified in the past few weeks. A month ago, the Russell 2000, a key index for small-cap companies, was outpacing the Russell 1000, which tracks larger companies, by roughly three percentage points year to date. This small-cap advantage has since expanded to nearly five percentage points, as recorded at yesterday’s close on June 13.
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Geopolitical Developments
South Korea is contemplating adjustments to its military policy concerning North Korea: Reuters
European Central Bank is gearing up to phase out its monetary stimulus: Reuters
Trump announces he will take a strong stance against China regarding trade: Bloomberg
The US, Saudi Arabia, and Russia agree on a collective goal to reduce energy prices: NY Times
China’s industrial production increased by 6.8% in May, slightly below expectations: RTT
The Federal Reserve raised interest rates and anticipates two more hikes in 2018: MarketWatch
Fed policy indicates that an inverted yield curve may be imminent: Bloomberg
The median GDP growth forecast for the US in 2018 increases to 2.8%: CNBC
US producer prices experience the highest annual increase in over six years in May: Reuters
Firms maintain a steady inflation outlook at 2.1% for the upcoming year: Atlanta Fed
The 10-2-year Treasury yield spread drops below 40 basis points for the first time since 2007:
Interest Rate Forecasts
Today, the Federal Reserve is anticipated to raise interest rates, a decision likely to further narrow the gap between shorter- and longer-term Treasury yields. If the already narrow yield spread continues to contract, it may spark renewed concerns regarding the US economy’s trajectory, particularly among some economists and investors.
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International Relations Highlights
Insights from the Trump-Kim summit: The Hill
North Korean media emphasizes US concessions regarding military exercises: Reuters
Eurozone industrial production declines in April, ahead of the ECB meeting: WSJ
Saudi-led forces launch a new offensive in Yemen: Time
Federal Reserve likely to raise interest rates today: Yahoo Finance
Key issues to be addressed in the upcoming Fed press conference: MW
Federal judge authorizes AT&T to acquire Time Warner: Bloomberg
Small business optimism in the US rises to a 34-year peak in May: Bloomberg
US consumer price inflation reached its highest level in six years in May: MW
In summary, the financial markets faced a challenging week, highlighted by equity and bond gains in the US while global markets faltered. Important updates emerged on economic indicators and geopolitical landscapes, presenting a mixed picture for investors. The focus on consumer sectors and investment strategies continues to shape the outlook as we move forward.
