The S&P 500 continued its steady climb and ended the week at a new record high. Investors remain confident the Federal Reserve will lower rates at its meeting in late July. The S&P 500 climbed 0.8% for the week. The MSCI ACWI gained 0.2%. The Bloomberg BarCap Aggregate Bond Index edged 0.2% lower as yields rose in response to stronger-than-expected inflation.

Key Points for the Week

• The S&P 500 reached another new record as investors retained an optimistic outlook for the effectiveness of rate cuts and a resolution to trade disputes.
• Inflation beat expectations but remains below targeted levels.
• Comments by Jerome Powell continue to signal a rate cut is likely.

Powell Comment Reassures Despite Inflation

Overall inflation remains low in the U.S., but core inflation exceeded expectations. The Consumer Price Index rose just 0.1% last month and is up only 1.8% over the last year, as seen in the accompanying chart. Weakness in food and energy prices kept inflation at low levels.

Prices for food and energy can be volatile, so economists also focus on core inflation, which excludes food and energy. When excluding those more volatile elements, inflation was much stronger. The U.S. Core Consumer Price Index rose 0.3% last month, the highest rate in a year and a half, and 2.1% year-over-year.

After stronger-than-expected core inflation and a strong jobs report, investors were concerned the Fed would hold off cutting rates. Fed Chair Jerome Powell eased investors’ concerns by stating the overall economic outlook has not improved despite the recently robust economic data.

Market expectations reflect the near unanimous expectation of a rate cut at the Federal Reserve meeting in late July. The only disagreement that remains is whether the Fed will cut 0.25% or 0.5%. The majority expects a smaller cut. Given the recent trend of stronger economic data, a single hike seems the best course of action.

Market expectations remain somewhat rosy. Not only are multiple rate cuts expected this year, but those cuts are anticipated to reenergize economic growth. Most U.S. companies will also report earnings in coming weeks. A little pessimism may slow the market’s steady advance.

Fun Story

Black bear photographed enjoying sunrise at New Hampshire hotel

There are few things better than watching the sunrise over the mountains, and apparently this bear agrees. A video was taken recently by Sam Geesaman, an employee of Omni Mount Washington Resort in New Hampshire, of a black bear enjoying the sunrise, leaning over the hotel balcony and gazing at the White Mountains.

This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

MSCI ACWI INDEX

The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.

Bloomberg U.S. Aggregate Bond Index

The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds

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