The stock market experienced another positive week, with the S&P 500 reaching a new all-time high. It was encouraging to see gains spread beyond large-cap growth stocks, with smaller companies and value stocks outperforming. The median price of an existing home also hit a new high in May at $419,300, up 5.8% year-over-year.
The housing market data was intriguing. Despite the low mortgage rates locked in by many homeowners’ years ago, inventories of existing homes for sale have risen nearly 20% over the past year. However, this is still insufficient, as the months’ supply of homes was 3.7 in May, below the 5.0 benchmark for what is considered a “normal market” by the National Association of Realtors. Additionally, not enough new homes are being built, and Millennials, the largest living generation in the U.S., have yet to significantly enter the housing market. Consequently, home prices are likely to remain elevated, and rents may continue to rise.
Looking ahead, the Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index, will be published this Friday. Core PCE (excluding food and energy) is expected to be 2.6%, the lowest year-over-year growth in over three years. We will also receive updates on 1Q24 GDP and the latest Durable Goods report. Outside the markets, there is a Presidential Debate on Thursday.
This week marks the end of the second quarter, which has been fascinating and rewarding for investors. All major asset classes have posted gains this quarter, though not in a linear fashion. The first half of the quarter saw broad-based gains and positive investor sentiment regarding economic growth, with rising interest rates and commodity prices. In the second half, growth expectations for the overall economy became mixed, while major AI companies like Nvidia continued to thrive. Leadership in equity markets shifted back to large-cap growth names, and interest rates and commodity prices fell.
In summary:
Stay invested. Stay diversified. Stay disciplined.
If you have any questions or comments, please let us know at strategists@brinkercapital.com or at rusty@orion.com. Thank you for your time and trust. See you next week!