What a week — again. Events from last week included surprising economic data pointing different directions, European rate cuts (the first since 2019), and the return of the Roaring Kitty. In the end, it was a nice week for US large cap stocks, US bonds, and international stocks. We did see new all-time highs in the S&P 500 and the Nasdaq again, in most part thanks to the continued strong performance of Nvidia (up by another remarkable 10% last week). The big economic news was last Friday’s labor data. Job growth and wage growth were both above expectations — which is a good sign for economic growth, but not as much for prospect of the Federal Reserve cutting short-term interest rates soon. The unemployment rate, however, did move to 4%, its highest level in over two years. Given the symbolic significance of the unemployment rate, this dampened the otherwise strong labor market numbers.

As for other key economic data last week, the May ISM Manufacturing data disappointed early in the week, but that was more than offset by the ISM Services report later in the week. In fact, services rebounded to a nine-month high and beat even the most optimistic forecasts. The rise in the overall index was a result of notably higher business activity, matching the highest level in eighteen months. New orders also climbed again. New orders have now expanded higher for the seventeenth straight month. Adding all the economic data up from the last week, the Atlanta Fed’s GDPNow is now predicting 2Q24 GDP at 3.1% (an improvement of 0.4% from the prior week).

Regarding this week, Wednesday will be a big day for the markets with both the Consumer Price Index and Federal Reserve’s latest interest rate decision. As for the former, expectations are for little change in CPI (3.4% year-over-year and 3.5% year-over-year for core {ex-food and energy}). As for the latter, it is expected that the Fed will have yet another pause in interest rates. The odds for the Fed to cut short-term rates at its September meeting, however, stand around 50% by the end of last week.

Let’s talk Nvidia. Everybody is talking about it, so let us write a bit more about it too and try adding some perspective for long-term investors. First, the recent price action and current valuations do seem extreme, but NVDA’s recent revenue growth, earnings growth and profit margins have also been truly extraordinary. Thus, there are rational reasons for those gains (which is a lot different than Roaring Kitty’s impact on GameStop). Nonetheless, did you know that over the thirty-two market sessions that NVDA has gained more than $1 trillion in market cap? To put into perspective, that six-week gain is greater than the entire market cap of Berkshire Hathaway, which Warren Buffett spent six decades in building.

In these market conditions, all market conditions really, the bottom line remains the same:

 

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!

 

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Key Data

Stocks, Bonds, Alternatives, & Real Assets as of June 7, 2024

Security Name

Risk Score

1 Wk

1 Mo

QTD

YTD

1 Yr

3 Yr Ann.

Global Equities (60% US, 40% Intl)

100

0.96%

2.06%

1.55%

9.63%

21.50%

5.35%

S&P 500 Total Return

102

1.36%

3.25%

2.04%

12.81%

27.21%

9.85%

Dow Jones Industrial Average

97

0.33%

0.08%

-2.15%

3.86%

17.62%

6.00%

NASDAQ 100 Total Return

122

2.53%

5.15%

4.25%

13.34%

33.95%

12.16%

TV Benchmark

107

1.40%

2.83%

1.38%

10.00%

26.26%

9.34%

Morningstar US Large Cap

102

1.90%

4.02%

3.27%

14.71%

30.53%

10.58%

Morningstar US Mid Cap

113

-1.00%

-0.93%

-3.77%

4.76%

16.33%

3.13%

Morningstar US Small Cap

125

-1.93%

-1.74%

-4.48%

0.95%

12.03%

-0.52%

Morningstar US Value

98

-0.81%

0.98%

-1.58%

6.70%

17.58%

6.91%

Morningstar US Growth

126

1.06%

1.62%

-0.56%

7.72%

22.17%

3.18%

MSCI ACWI Ex USA 

98

0.91%

1.32%

2.15%

7.07%

14.72%

0.72%

MSCI EAFE 

101

0.61%

1.92%

2.07%

8.12%

16.59%

3.32%

MSCI EM

98

2.37%

0.74%

3.46%

5.98%

11.18%

-5.23%

Bloomberg US Agg Bond Index

27

1.63%

1.59%

0.38%

-0.40%

2.76%

-2.73%

Bloomberg Commodity Index

70

-1.04%

-0.26%

3.41%

5.68%

6.73%

5.98%

Wilshire Liquid Alternative Index

25

0.02%

0.47%

0.21%

3.38%

7.78%

1.14%

US Dollar

10

-0.59%

-0.90%

-0.42%

2.73%

-0.02%

4.92%

Bloomberg US Treasury Bill 1-3mo

1

0.10%

0.49%

1.03%

2.36%

5.51%

3.00%

Source: Morningstar

The TV Benchmark represents an average of the S&P 500, Dow Jones IA, and NASDAQ 100 return indexes. The Orion Risk Score represents risk relative to the global equity market.

 

 

Interest Rates as of June 7, 2024

Rate

This Week

1 Wk Δ%

13-Wk Treasury Yield

5.24%

0.00%

10-Yr Treasury Yield

4.43%

-0.08%

Bloomberg US Agg Yield

5.15%

-0.05%

Avg Money Mkt Yield

5.14%

0.01%

Avg 30-Yr Mortgage Rate

7.16%

0.11%

Sources: Yahoo Finance, S&P Global, Crane Data, BankRate

 

 

Key Economic Data Last Week

Data Point

Expectation

Actual

ISM Manufacturing

49.6%

48.7%

ADP Employment

179,000

152,000

Consumer Credit

$10.7B

$6.4B

US Nonfarm Payrolls

180,000

272,000

US Unemployment Rate

3.9%

4.0%

Sources: MarketWatch, First Trust

 

 

Key Economic Data This Week

Data Point

Expectation

Release Date

Consumer Price Index (CPI) YoY

3.4%

6/12/24

Core CPI YoY

3.5%

6/12/24

FOMC Interest Rate Decision

Pause

6/12/24

Producer Price Index (PPI)

--

6/13/24

Core PPI YoY

--

6/13/24

Source: MarketWatch

 

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The views expressed herein are exclusively those of Orion Portfolio Solutions, LLC d/b/a Brinker Capital Investments a registered investment advisor, and are not meant as investment advice and are subject to change.
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