Seasonal Trend Indicates Short Term Weakness

Jun 10, 2024

Recap: Investors Still Expecting September Rate Cute


Wall Street is optimistic that the economy and job market are slowing down enough for the Federal Reserve to consider cutting interest rates later this year.

This sentiment pushed the S&P 500 and NASDAQ to record intraday highs, although the smaller-cap Russell 2000 pulled back.

Growth stocks also significantly outperformed value stocks, marking the biggest margin so far this year. However, some analysts are concerned that the labor market remains too strong, citing new data that shows more jobs were added last month than expected.

The U.S. economy added 272,000 jobs in May, significantly higher than the forecasted 185,000. The unemployment rate also slightly increased to 4%.

As a result, traders now believe there is a roughly 50% chance that the Fed will cut rates at its September meeting.

On the other hand, optimistic analysts point to recent rate cuts by the European Central Bank and the Bank of Canada this week, hoping that the Federal Reserve might follow suit soon.

The news highlights the ongoing debate about the state of the economy and the potential for interest rate cuts.

While some see signs of a cooling economy that could prompt the Fed to act, others believe the strong labor market may delay such moves. Investors will closely watch upcoming economic data and Fed communications to gauge the likelihood and timing of any rate cuts.

Weekly Market Update Video


What’s Going On In Your Portfolio?


Our client equity portfolios are still partially invested. As market rotation (see above video) continues, I am keeping a close eye for opportunities to take advantage of seasonal trends.

The High Yield model is still fully invested as the BofA  High Yield Index remains in an upward trend.

This week, there is a Fed meeting, so I will be listening closely for any hints that the Fed is starting to see inflation resume it’s downward track.


Upcoming Economic Data to Keep an Eye On


Source: Trading Economics


By John Rothe, CMT

Founder & Chief Investment Officer

Riverbend Investment Management

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