The Week in Charts: A Pause at Last
The S&P 500 is off to its best start to a year since 1997, up over 15%. Wall Street strategists were not expecting a great year for stocks entering 2021. Learn more about the latest stock market trends.
Charlie Bilello
Chief Market Strategist @ Creative Planning Investor | Writer | Reader | Thinker Trying to become a little wiser every day.
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New: The Week in Charts ‼
— Charlie Bilello (@charliebilello) June 16, 2023
-- Just Like Nobody Predicted
-- A Pause at Last
-- Down Goes Inflation
-- What About Japan?
-- The Consumer Pullback
-- And more...
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(1) Best Start Since 1997
— Charlie Bilello (@charliebilello) June 19, 2023
The S&P 500 is off to its best start to a year since 1997, up over 15%. $SPX
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(1a) Just Like Nobody Predicted
— Charlie Bilello (@charliebilello) June 19, 2023
Were the experts predicting a great year for stocks? Not exactly. Entering 2023, Wall Street strategists were actually forecasting a down year for the first time in decades.
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(1b) 27% Rally Brings Out the Bulls
— Charlie Bilello (@charliebilello) June 19, 2023
The S&P 500 has rallied 27% from its October low and optimism is back in the air. Bulls outnumbered Bears by 22% in the latest AAII sentiment poll, the largest spread since November 2021.
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(1c) New High for Tech
— Charlie Bilello (@charliebilello) June 19, 2023
The Tech sector ($XLK ETF) hit a new all-time high last week, surpassing the December 2021 peak (note: total return, including dividends).
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(2) A Pause at Last
— Charlie Bilello (@charliebilello) June 19, 2023
After 10 consecutive meetings with rate hikes, the Fed finally decided to pause, holding the Fed Funds Rate at a range of 5.00-5.25%.
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(2a) Tightest Monetary Policy Since 2007
— Charlie Bilello (@charliebilello) June 19, 2023
The Fed Funds Rate is now over 1% higher than the US inflation rate. The last time monetary policy was this tight with a Fed Funds Rate above 0% was back in October 2007.
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(2b) One More Hike in July?
— Charlie Bilello (@charliebilello) June 20, 2023
The market is currently pricing in just one more rate hike, and for that hike to take place in July (74% probability). After that, a pause is expected for the remainder of the year w/ rate cuts starting in Jan 2024.
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(3) Down Goes Inflation
— Charlie Bilello (@charliebilello) June 20, 2023
-CPI moved down to 4% in May, lowest since March 2021.
-PPI moved down to 1.1% in May, lowest since December 2020.
-US Import Prices fell 5.9% over the last year, the largest YoY decline since May 2020.
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(3a) Back on the Path to Prosperity
— Charlie Bilello (@charliebilello) June 21, 2023
US wages outpaced inflation on a YoY basis in May by 0.2%, ending the ignominious streak of 25 consecutive months of negative real wage growth.
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(4) Valuation Matters
— Charlie Bilello (@charliebilello) June 21, 2023
Japan’s CAPE ratio was a sky-high 77 in Dec 1989, making the US dot-com bubble look tame by comparison (peak CAPE ratio of 47). More than 33 years later, after an 82% drawdown, the Nikkei is still below its bubble peak.
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(5) US Consumer Is Pulling Back
— Charlie Bilello (@charliebilello) June 21, 2023
After adjusting for inflation, US retail sales fell 3.3% over the last year, the 7th consecutive YoY decline. That’s the longest down streak since 2009.
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