Ladies and gentlemen, the weekend! In this space each week, Greg and I share some of our favorite articles, notes, and graphics from the past week along with our commentary. Please feel free to provide feedback and forward along to others if you enjoy. We appreciate you taking the time to read. 

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June 2023 Market Summary

“Stocks had a decidedly positive June as the Dow Jones Industrial Average rose 4.7%, the S&P 500 advanced 6.6%, and the NASDAQ charged 6.8% higher. June was an especially good month for small-cap stocks; the Russell 2000 Small Caps index surged 8.1%. Globally, the MSCI Developed Markets index tacked on 4.6% and its Emerging Markets counterpart increased 3.9%.

Last month’s Inflation reading came in at 4.05%, its lowest level in two years. Core Inflation declined slightly, while CPI notched marginally higher [month-over-month]. Amid softening inflation, the Federal Reserve kept the Target Federal Funds Rate unchanged at 5.25%, making its June 14^th meeting the first without an increase in the last 11 meetings.

Medium-term US Treasury yields rose in June while those on shorter-term Treasury Bills or long-term bonds either declined or ended the month relatively unchanged. The 2-Year and 3-Year made the largest advances, 0.47% and 0.45%, respectively. The 1-Month Treasury Bill fell 4 basis points, and interestingly enough, the long-term 30-Year was unchanged as of the end of June.

2022 was the [third]-worst first half for the S&P 500 since 1951. With a decline of 20.6%, the index tumbled into a bear market in the first six months of the year.

2023, on the other hand, saw the pendulum swing the opposite way. The S&P 500 produced a 15.9% gain through the first six months of the year, good for the tenth-best first half since 1951. As Charles Dickens wrote in A Tale of Two Cities, ‘It was the best of times, it was the worst of times’—certainly true for the S&P 500 in 2023 and 2022, respectively.”

June ended on a high note with most of the major stock indexes up more than 4%. The U.S. market as measured by the S&P 500 is off to its 10^th best start of the year since 1950 and in direct opposition to 2022, which was the 3^rd worst start. There are some large disparities between value-growth styles and small-mid-large cap indexes, but when you zoom out over the trailing 1-2 years for full downturns and recoveries, it makes more sense.

On the other hand, this holiday-shortened week was a bit of a reality check with most major stock indexes falling moderately due to Fed news, jobs reports, and trading volumes around Independence Day.  

Please be on the lookout for our 1^st half recap and 2^nd half outlook webinar to be finalized and published in the next couple of weeks.

Prioritizing the Strong Economy

“Last week we received a number of reports reflecting surprising underlying strength for the economy. This includes stronger results than expected for durable goods data and jobless claims coming in less than expected.

What surprises and disappoints me, despite inflation indicators coming in at or below expectations in the latest reports, is that the Fed continues to escalate its tightening and hawkish stance. The Fed funds market has essentially priced in another hike at the upcoming July meeting in a few weeks and at least one more by year’s end.

The Fed appears to be relying on the old Phillips curve idea, which suggests that a strong economy leads to more inflation. However, the numbers in commodity markets and oil markets do not indicate elevated inflation.

But the market is responding to the strong economic data over fear of the Fed’s ongoing war on growth, as the momentum in the tech sector remains quite strong. Earlier in the year, any hint at a tighter stance on policy and the market shuddered but now it is brushing that off. We will see how long that can last…

The market is currently prioritizing the strong economy over fear of the Fed. I think momentum and fear of missing out on gains can take the market higher over the short run. It could end by taking us towards an overvalued level. But in the second half of the year, we will be watching for weak employment reports and other negative shocks that could alter the strong current tones in sentiment. However, value stocks are already positioned for a mild recession, and their valuations are persuasive in the long run.”

Professor Siegel’s commentary echoed mine (and others) from last week. The Federal Reserve seems dead set on raising interest rates again in July – 92% market-based probability vs. 65% one month ago. However, capital markets have been prioritizing the strength and resilience of the economy over the Fed. I should note “prioritizing” not “ignoring”. If we end up at higher rates and for longer, it’s a headwind, but some areas of the market have already priced in a mild recession quite some time ago.

9 Powerful Questions to Ask a Financial Adviser in Your First Meeting

“Here are the 9 most impactful questions you can ask in that first meeting with your prospective financial adviser:

1. Are you a fiduciary?

First, what is a fiduciary? In simple terms, a fiduciary is an adviser who is required by law to work with your best interest in mind when it comes to managing your assets. While not all financial advisers follow these guidelines, those who do are most often known as registered investment advisers, or RIAs…

2. What are your qualifications/credentials?

Certified financial planner (CFP)®: This certification is backed by the Certified Financial Planner Board of Standards, also known as the CFP Board. If you’re looking for an adviser with expertise in financial planning, taxes, insurance, estate planning and retirement saving, a CFP may be the way to go. CFPs are also required to be a fiduciary of your assets, which in short means they are required to work in your best interest when it comes to managing your money…

3. What are your personal or firm values?

Knowing an adviser’s values or investment philosophy can either be a dealmaker or breaker for many of us…

4. Are you primarily a financial planner or an investment adviser?

By now, it probably comes as no surprise that there is more than one kind of financial adviser. Knowing the difference between the two most common — financial planners and investment advisers — is another way to help determine whether the adviser you are meeting with is right for you…

5. What is your fee structure?

Knowing how your prospective financial adviser charges you for their services is likely one of the most important factors to consider.”

All nine of these questions/topics are on point, so I would encourage you to read through the remainder. They are some of the main factors that we examined when setting up our firm – to be able to confidently provide answers in introductory meetings that we believe are the best solution for clients.

Friday’s Jobs Report slightly underperformed expectations for the first time in 14 months. The headline jobs number was +209,000 jobs, and the previous two months were revised down by 110,000 jobs combined. The unemployment rate was little changed at 3.6%.

Overall, it was a solid report. It shows continued economic growth at a moderate pace. More importantly, it helped ease concerns that the Federal Reserve would overreact to ADP’s private sector jobs outperformance on Thursday.

Thanks for reading. Have a great weekend!

RBG Wealth Advisors LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.