Stocks closed mixed yesterday with the S&P and Nasdaq both in the red. But like the day before, the small-cap Russell 2000, and the mid-cap S&P 400 both closed sharply higher with gains of 1.78% and 1.50% respectively.
Additionally, while the market-weighted S&P 500 was down -0.38% yesterday, the equal-weighted S&P 500 ETF was up 0.74%. The market-weighted index has been powered by the top 10 largest names, resulting in a double-digit gain, while the equal-weighted index was actually lower for the year until just recently. This showed the narrowness of the rally. But seeing the small-caps, mid-caps, and other large-caps getting in on the action shows the breadth of the rally widening. And that?s a positive development.
The OECD (Organization for Economic Cooperation and Development), released a report yesterday projecting global growth of 'just' 2.7% this year. They noted it was the lowest growth rate since 2008. But they also commented that the global economy is showing signs of improvement.
And indeed it is. The OECD report comes on the heels of Tuesday's report by the World Bank talking about slower growth as well. But they actually raised their global growth rate from January's 1.7% estimate to 2.1% now. Yes, it's slower than last year. But it's still solid growth. I know some are trying to put a negative spin on those reports. But it's hard to get dour on a 2.1% or 2.7% growth rate as those both show pretty decent growth. And as the OECD report notes, 'the global economy is showing signs of improvement.'
In other news, yesterday's MBA Mortgage Applications were down -1.4% w/w, with purchases down -1.7% and refi's down -0.7%.
Today we'll get Weekly Jobless Claims, and Wholesale Inventories.
And tomorrow will be a slow day for economic reports as well with only the Quarterly Service Survey on the docket.
What everybody is really waiting for is next week's FOMC announcement on rates on Wednesday, June 14.
At the moment, the expectation is for the Fed to pause on rates. But there's a growing belief that they may raise another 25 basis points at the July meeting. So all eyes will be on next week's meeting.
In the meantime, stocks continue to perform well. YTD, the Dow is up 1.56%, the S&P 500 is up 11.2%, the Nasdaq is up 25.2%, the small-cap Russell 2000 is up 7.22%, and the mid-cap S&P 400 is up 5.68%.
And it looks like there's more upside to go. Especially when you add in the favorable statistical trends of 1) the 4-year Presidential Cycle which shows that year 3 (that's 2023), is the best year of all 4 years (since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%), and 2) over the last 60 years, if a bear market in the S&P goes down by -25% or more (the S&P was down by -25.4% last year between their bull market high close and their bear market low close), stocks go up on average of 38% a year later (those stats encompass 9 bear markets, with 8 of those seeing stocks up the next year).
If you missed the rally so far, or wish you took greater advantage of it, you might be wondering if now is a good time to jump in. If so, be sure to read our latest commentary...
Should You Jump on This Rally?
Best,
