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The S&P 500 rose for the fourth week in a row, climbing to its highest level in nearly 10 months. Each of the major U.S. indexes produced a fractional weekly gain in a mostly quiet week of trading. After closing on Thursday at 4,293.9, the S&P 500 eclipsed the level needed to exit the bear market that it had been in since January 2022. The index now has entered a bull market after rising 20% since a low on October 12, 2022. The U.S. small-cap stock benchmark outperformed its large-cap peers for the second week in a row, narrowing small caps’ year-to-date underperformance gap versus large caps. The Russell 2000 Index has gained more than 5% over the past two weeks.   The Tony awards are this evening so I have broken down this week’s update using songs from one of the nominees, Into the Woods (Best Revival).

Giants in the Sky

The market giants are sky high with the two largest stocks Apple and Microsoft hitting all time highs this past Monday.   Mega cap tech stocks have done fantastic in what has been a period of  lower volatility. U.S. stock market volatility has dropped to the lowest level since January 2020 after falling 31% from a recent high on May 24. The CBOE Volatility Index sank on Friday to 13.8 just above its level before the start of the COVID-19 pandemic. You should view any renewed phase of downward volatility as an opportunity to reposition into stocks if you have money on the sidelines.   I think the market will have one more down draft and then a more sustainable rebound will occur after that. The next rally will likely have broader participation meaning more individual stocks going up than what we have seen in this current rally.

I Know Things Now

No major U.S. economic releases this past week. The data we received got the market excited and scared.  The U.S. economy has continued to generate new jobs at a rapid clip. That pace may be slowing.  The latest weekly count of newly filed unemployment claims rose to the highest level since October 2021. The market is trying to guess what the Fed will do next week. The jobs number excited investors as it renewed hopes that the Fed would pause with the rate hikes. I continue to feel the Fed will disappoint the markets next week and raise rates one more time.     In fact the Bank of Canada’s scared markets with  a surprise rate hike this week. I think it could be indicative of what the Fed will do next week. The Bank of Canada was the first major central bank to pause their hiking cycle back in January. The rationale for their change in policy was a resilient economy and a still strong labor market.  The same reasons I believe the Fed will raise next week.

One quick update, on the Schwab conversion, many of you have received the DocuSign for the Schwab conversion already.   Those of you who have TD Ameritrade accounts with me and have not received the DocuSign, the email will be coming at some point over the next ten days.  If you have trouble completing the DocuSign let me know and I can either walk you through how to do it myself or have somebody from the Schwab transition team walk you through it.   If you’d like to speak about your investments or your plan, my calendar link is below and you can schedule a phone or zoom appointment at any time.