Resources

Global Equities:

Stocks got more good news from the Friday jobs report, which provided confidence to investors that the Federal Reserve may be reigning in inflation without triggering a recession.

The recent selloff in global markets has triggered some concerning headlines, being the biggest drop in Japanese stocks since 1987 and the highest reading of the VIX index (a measure of volatility and fear) since the COVID-19 pandemic.

When the Federal Reserve paused on rate hikes roughly a year ago, the consensus view of the market, economists, and even Fed officials was that rate cuts would occur sometime in the second quarter of 2024.

When we penned our Annual Outlook, we noted that markets were beginning to return to a semblance of “normalcy” as the effects of pandemic-era rate cuts and subsequent hikes from the Federal Reserve (the “Fed”) were poised to unwind.

US stocks are on a remarkable run, with both the Nasdaq Composite and S&P 500 trading at all-time highs and the Dow Jones Industrial Average just below the record 40,000 level attained in mid-May 2024.

On June 6th, the European Central Bank (ECB) cut its key interest rate from 4% to 3.75%.

Various members of the Federal Reserve have been out in force on the speaking circuit, offering their updated assessments of inflation and the economy.

It’s no secret that the US stock market has become increasingly concentrated in recent years, with the largest, most dominant technology companies representing a disproportionate amount of the S&P 500 Index’s market capitalization.

As investors, we must often remind ourselves that markets are forward-looking in nature, and that the current, known events have less influence on market returns than one would think.

Back in the fall of 2023, the Fed signaled that rate hikes were finished, prompting a significant stock market rally that has been largely uninterrupted.

By Dr. George Calhoun – Vestbridge Advisors, Inc. Advisory Board Member
Executive Director of the Hanlon Financial Systems Center