Happy Independence Day! Hope you are all doing well and enjoying this extended holiday weekend. The major U.S. stock indexes regained the ground it had lost the previous week and then some. Positive economic data lifted the S&P 500, the NASDAQ, and the Dow more than 2% each. For the NASDAQ, it was the ninth positive week out of the past ten as it finished off its best first half since 1983. June was a great month for stocks. The S&P 500 and the NASDAQ both gained nearly 7% to record their fourth positive month in a row. The Dow climbed nearly 5% and posted its best month since November 2022. For the S&P 500, it was the best result since last October. I have broken down this week’s update using quotes from one of our less celebrated founding fathers, Nathanael Greene.
Learning is not virtue but the means to bring us an acquaintance with it.— Nathanael Greene
The first half of 2023 is in the books and while history is not always the best indicator of the future there is some information we can glean from it. The 15% return for the S&P 500 in the first half of 2023 is the fifth-best start since 1990. In those four better instances, the market recorded an average return for the full year of 33%. Strong first halves are often a good sign. Since 1990, the stock market has gained more than 10% in the first half ten times. In every one of those instances the market rose further in the second half. If the market is going to continue higher than it will likely be because the breadth improves. Seven of the ten S&P sectors have been either modestly positive or slightly negative. The information technology sector accounted for nearly 65% of the S&P 500’s year-to-date total net return. In fact almost all of the S&P’s return was generated by 3 of its 10 sectors. Consumer discretionary generated about 20% of the return and communication services added 18%. If we get a more broad based rally than we could see the S&P reach a new high.
Settle the prices of things upon some reasonable footing, of all such articles and services as are necessary for the use of the public.— Nathanael Greene
Fast forward 245 years and the U.S. Federal Reserve’s like Greene realizes inflation left unchecked erodes the confidence of the people. The Fed has vowed to continue aggressively pursuing price stability and its 2% inflation target. This week we saw progress is being made. The Fed’s preferred gauge for tracking inflation showed that consumer prices rose in May at the slowest monthly pace in two years. The Personal Consumption Expenditures Price Index rose at a 3.8% annual rate, down from a revised 4.3% figure in April. Excluding volatile food and energy prices, core inflation rose 4.6% in May down from 4.7% in April.
I have conducted the business with as much prudence and economy, as if my private fortune had been answerable for the disbursements.— Nathanael Greene
Prudence in disbursing public funds, what a novel concept. This week the Supreme Court rejected the Biden administration’s attempt to forgive $430 billion in student loan debt. The federal student loan forgiveness program was never going to survive judicial review by the Supreme Court not because of the composition of the court but because it was not well thought out. The way this was structured was more of a hand out than a hand up. Forgiving loans of up to $20,000 to more than 40 million people, many of whom had the ability to pay the loans. The optics were bad as well, as those 40 million people are all voting age. This allowed opponents of the program to describe it as an attempt to buy votes. Like many policy decisions the unintended consequences were not considered. As a result, instead of making the problem better it may have made the problem worse. The people who most need the assistance likely have not made payments because they have not been required to since the pandemic hit. Many of those people believed and trusted the administration that their student debt would soon be gone and now have been accustomed to living on a budget that didn’t include student loan repayments.
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