Dumaine Investments Weekly Market Update – June 21, 2023
• After a brief market rally in the wake of the central bank’s decision to pause rate hikes, US stocks have reversed course and traded down so far this week. In congressional testimony on Wednesday, Fed Chair Powell said policymakers expect interest rates will need to move yet higher to contain price pressures—echoing comments he made last week accompanying the FOMC’s decision to pause. He further indicated that the timing of additional hikes will be based on incoming economic data, a position thoroughly consistent with past communication from both Powell and other senior Fed officials.
• Given that the Fed’s interest rate ‘dot plot’ median currently points towards the likelihood of at least two additional rate hikes this year, we expect markets to be extremely focused on upcoming economic data. In the week to come, key data released will include both initial jobless claims and existing home sales (on Thursday), as well as durable goods orders (on next Tuesday). Several Fed officials will also be giving speeches over the next week, which could create additional volatility in markets depending on the substance of the remarks.
• At the global level, tensions between the US and China continue to grow, with Biden’s recent reference to Xi Jinping as a dictator causing sharp concern from China with state media construing the statement as ‘public political provocation’ by the US. The tensions re-emerged just days after the world’s two biggest economies held meetings to help stabilize relations as America’s Secretary of State, Antony Blinken, travelled to Beijing in an attempt to improve the nations’ dialogue. Along with uncertainty around the trajectory of the US economy and future Fed policy, diplomatic and economic relations with China will likely be a critical factor in determining the strength and durability of an extended market recovery.
DISCLAIMER: The information provided in this blog post is for informational purposes only and should not be construed as financial advice. Investment decisions should be based on individual financial goals, risk tolerance, and consultation with a qualified financial professional.