May 27, 2024

Weekly Market Update

By Michael McKeown, CFA, CPA - Chief Investment Officer

Weekly Market Update

Chart of the Week

How does gold do when the Federal Reserve stops hiking interest rates?

One might think that stopping interest rate hikes means interest rate cuts are around the corner. The cutting cycle should be inflationary as the Fed stimulates demand. But this is not always the case.

Gold marches to the beat of its own drum.

The chart below shows gold’s performance in each cycle one year prior to and two years following the last rate hike. In five of the previous nine cycles, gold went down the following two years after the last hike.

However, gold performed well after the last two pauses in 2006 and 2018. One can see gold’s performance in this cycle in the teal line below. Since the last hike in July 2023, gold is up 20%.

Gold Price

What We’re Reading

Lazy Work, Good Work – Morgan Housel
Are You Making These 5 Common Portfolio Mistakes? – Morningstar
How Does the Stock Market Perform in an Election Year? – Dollars & Data
Private Equity has Fallen in Love with Sports – Sportico

Podcast of the Week

Understanding the Inner Workings of Multi-Strategy ‘Pod Shops’ – Odd Lots, Bloomberg

Last Week

This past week, both consumer confidence and sentiment surveys surprised on the upside. Durable goods and Purchasing Manager Indices were also strong. However, new home sales remain sluggish, with mortgage rates hovering around 7%.

The Past Week

The Week Ahead

On Friday, price data on personal consumption will be key. The Fed’s goal is 2.0% for core PCE prices, which is forecasted to come in above the target at 2.8%. The first week of June includes data from the Institute of Supply Management and the jobs report for May. After adding only 175,000 jobs in April and unemployment rising to 3.9%, slowing employment trends may be here.

The Week Ahead

Thank you for reading.

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