·¬ÇÑÊÓƵapp

Stocks Continue to Rally; PCE Data Released this Week 

Overview: Stocks around the globe continued to rally last week, as the S&P 500 index recorded its 31st all-time high of the year mid-week, finishing the week higher by 0.6%. Markets were encouraged by industrial production, manufacturing and services data that all exceeded consensus expectations, adding to optimism that strong growth can continue. In bonds, yields finished the week modestly higher, with the 2-Year and 10-Year U.S. Treasury notes ending the week at yields of 4.73% and 4.26%, respectively. GDP Now data from the Atlanta Federal Reserve is now forecasting a 3.0% growth in GDP for the second quarter, as investors are increasingly hopeful that a recession can be avoided as inflation continues to fall. Markets will closely monitor personal consumption expenditure (PCE) data released on Friday. This is the Fed’s preferred measure of inflation, and Core PCE is expected to fall from 2.8% in April to 2.6% in May. On the earnings front, key reports this week will come from Nike, FedEx and Walgreens as investors track the ongoing health of consumer spending. 

Update on the U.S. Dollar (from JP Morgan): 2024 began with consensus expectations of a weaker U.S. dollar due to stretched valuations. However, nearly halfway through the year, the dollar index (DXY) has gained around 4.4% year-to-date, raising questions if the consensus has changed. The case for a weaker dollar in 2024 was based on deteriorating fiscal and trade deficits and a narrowing interest rate differential with other major economies. As the year unfolded, resilient growth and slower progress on inflation in the U.S. pushed back rate-cut expectations. Meanwhile, other major central banks embarked on monetary policy easing ahead of the Fed. Consequently, as shown in the chart of the week, the greenback gained broadly across all the currencies in the dollar index. Despite a relatively modest 3.4% fall, the euro, with the highest weight in the index, contributed the most to the dollar’s ascent as the ECB is seen cutting rates faster and further than the Fed. Calls for snap elections in France also led investors to flock to the dollar, reflecting its continued safe-haven appeal. Notably, the Japanese yen has had an outsized contribution to the dollar’s rise this year. The yen has depreciated more than 13% this year, nearing its 34-year lows, as the BOJ is seen delaying normalizing its monetary policy. Meanwhile, the British pound has largely held its ground due to strong economic data, albeit helped by favorable base effects. In summary, while long-term fundamentals still indicate that the dollar is richly valued, higher-for-longer rates in the near term could continue to support stronger-for-longer dollar.

Sources: JP Morgan Asset Management, Goldman Sachs Asset Management, Barron’s, Bloomberg, Factset, CNBC

This communication is for informational purposes only. It is not intended as investment advice or an offer or solicitation for the purchase or sale of any financial instrument.

Indices are unmanaged, represent past performance, do not incur fees or expenses, and cannot be invested into directly. Past performance is no guarantee of future results.