June 24, 2024

Weekly Market Update

By Michael McKeown, CFA, CPA - Chief Investment Officer

Weekly Market Update

Chart of the Week

Our downtown Cleveland office is across the street from the Federal Reserve of Cleveland, one of twelve regional Fed bank locations.

There are around 1,000 employees, some of whom focus on research, with a strong reputation for their work on inflation.

The 2% target inflation rate is often discussed. Yet there are many inflation data series, including the Consumer Price Index (CPI) and Producers Price Index (PPI).

For the Federal Open Market Committee, which sets interest rate policy, there is one data point that matters the most: core Personal Consumption Expenditures (PCE).  In the 2010s, core PCE averaged 1.7%, below the 2% target. Since 2021, core PCE has been well above target with a peak of 5.6%.

The Cleveland Fed has a real-time indicator of this price index in its “Nowcast” series, attempting to give a real-time look at prices. The latest forecast is for 2.6%, of which we will get May’s data on Friday. Hopefully, we will continue to see this trend towards the 2% objective. This matters as the future path of interest rates depends on inflation, and in particular, core PCE.

Cleveland Nowcast - Core PCE

What We’re Reading

Quiet Compounding – Morgan Housel
Home Sales Fell to One of the Lowest Levels on Record in May – Redfin
Concerned About Market Concentration and Lofty Valuations? Consider Small Caps – CFA Institute
The Art of Asking Smarter Questions – Harvard Business Review

Podcast of the Week

Why Tom Lee Thinks We Could See S&P 15,000 by 2030 – Odd Lots, Bloomberg

Last Week

The home construction industry continues to suffer with fewer starts and falling sentiment. The Shiller home price index still grew 7% from a year ago. Initial jobless claims are beginning to rise, making some question the strength of the labor market. S&P’s survey on global services and manufacturing surprised on the upside.

The Past Week

The Week Ahead

The end of the month and the start of a new one bring many reports. On Thursday, the final estimate for GDP for the first quarter comes out, along with an expected decline in durable goods orders for May. On Friday, we will see the consumption and price data. On deck to start July, we have data on manufacturing and services. Next week is shortened by the holiday, as markets are closed the afternoon of July 3rd and on the 4th of July.

The Week Ahead

Thank you for reading.

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