Hope you are all doing well. U.S. stock indexes posted mixed weekly results, flattening out after three consecutive weekly gains pushed the S&P 500 and the NASDAQ to record highs. The NASDAQ gained 1.5% on the week; the S&P 500 finished fractionally higher while the Dow ended slightly lower. Thankfully, our brave law enforcement officers were organized and effective and thwarted the shooter’s efforts last night before he reached the ballroom. I would not be shocked if this weekend’s events cause market volatility on Monday. With the market at all-time highs, this is a good time to shift any money in stocks that you plan to spend before year-end. The Rocky Balboa statue in Philadelphia was moved. On Saturday, it took up a new home inside the Philadelphia Museum of Art. I have broken down this week’s update using quotes from the fictional boxer.
“It ain’t about how hard you hit. It’s about how hard you can get hit and keep moving forward.” – Rocky Balboa (Sylvester Stallone)
Threats and attacks on oil infrastructure and shipping lanes have made the energy market extremely volatile. Narratives about the Middle East conflict are continually shifting. The market can accept a fair amount of turmoil in the Middle East as long as oil shipments keep moving forward. U.S. crude was trading around $95 per barrel on Friday afternoon, up from roughly $83 at the end of the previous week. Even with the weekly rise, oil was well below its year-to-date peak of around $113 reached on April 7. On Friday, the market was hopeful that another round of peace talks would begin and that traffic through the Strait would gradually return to normal. However, after arriving on Friday, Iran’s Abbas Araghchi left Islamabad. This prompted President Trump to announce that his envoys, Steve Witkoff and Jared Kushner, will no longer travel there on Saturday for peace talks. Oil will likely rise further next week. Markets view the back-and-forth from the two sides as noise. They remain squarely focused on the activity in the Strait.
“Time takes everybody out. Time is undefeated.” – Rocky Balboa (Sylvester Stallone)
This upcoming Fed meeting could be Jerome Powell’s last as chair. The once somewhat murky path for Kevin Warsh to be confirmed by the Senate seems to have cleared. The Department of Justice announced it will drop its criminal investigation into Powell following overspending on renovations of Federal Reserve buildings. Powell had vowed to stay on until the criminal probe was resolved. With a decision made, he must choose: either follow historic precedent and walk away from the Fed (what most prior chairs have done) or stay on for the final two years of his term as governor. Markets believe Warsh will lead the Fed to cut interest rates sooner than Powell would have.
“Going in one more round when you don’t think you can. That’s what makes all the difference in your life.” – Rocky Balboa (Sylvester Stallone)
For much of the early part of this year, U.S. growth stocks have been pummeled. However, they are starting to make a comeback. It is now four weeks in a row that growth stocks have outpaced their value counterparts. Jabbing at the value style’s year-to-date performance lead. The growth benchmark gained more than 16% over the four weeks versus just 8% for its value counterpart. Long term, I continue to believe you should be most heavily positioned in large-cap growth stocks. U.S. mega-cap technology stocks are expected to continue generating a disproportionate share of overall earnings growth. Analysts expect the Magnificent Seven (Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, Tesla) stocks to post average first-quarter earnings growth of 22.8%. In contrast, the other 493 companies in the S&P 500 are projected to produce 10.1% growth.
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