2024 | June 10

The Markets

Stocks Gain

U.S. stock indexes rebounded from a modest setback the previous week as the NASDAQ and the S&P 500 eclipsed record highs set last month. Renewed enthusiasm over artificial intelligence lifted technology stocks, and the NASDAQ’s 2.4% weekly return outpaced the more modest gains for the S&P 500 and Dow.

May’s jobs growth figure of 272,000 came in well above most economists’ forecasts for around 180,000 and wage growth also exceeded expectations, further complicating the outlook for a potential interest-rate cut this year. Government bond yields rose following Friday morning’s report and stocks were little changed.

The yield of the 10-year U.S. Treasury bond fell on Thursday to its lowest level in more than two months, but the yield drop quickly reversed course in the wake of Friday’s stronger-than-expected jobs report. After closing on Thursday at 4.28%, the 10-year note’s yield climbed to 4.43% on Friday. 

As the U.S. Federal Reserve considers whether to begin cutting interest rates later this year, the European Central Bank approved its first such reduction since 2019. Policymakers cited recent progress in reducing inflationary pressures as they approved a quarter-point rate cut affecting the 20 countries that use the euro currency.

The price of U.S. crude oil fell below $73 per barrel on Tuesday to its lowest level in four months after a consortium of oil-producing countries announced plans for a more gradual phase-out of production cuts. The price recovered somewhat to more than $75 per barrel on Friday, but it was still well below a recent high of nearly $88 in early April.

The new week will bring a U.S. Federal Reserve policy meeting that concludes on Wednesday and an inflation report set to be released that morning. The Fed is widely expected to keep interest rates unchanged; the Consumer Price Index report will show how May’s annual inflation rate compared with April’s 3.4% figure.

Source: John Hancock Investment Management

Where Should My Next Dollar Go?

A Volatile Mix: Political Polls and Investing

During elections, political polls tend to be abundant. Polling organizations gather data using a variety of methodologies and then publish information that purports to reflect the public’s views.

Last week, John Authers of Bloomberg reminded readers not to make investment decisions based on polling data. “…While investors are good at gauging economic and corporate risks, political ones are harder. In particular, they tend to put more weight on opinion polls than they can bear; they’re also prone to misjudge what politicians will do once in office.”

The election in India last week delivered a timely example.

“…India has the world's largest democracy with the world's most popular leader (according to the Morning Consult survey), favorable demographics, and debt on a sustainable path, all supporting the world's fastest economic growth,” wrote Jeffrey Kleintop of Schwab.

The country’s growth has been supported by domestic government policies and international supply chain diversification. As a result, the Indian stock market has been growing and moving closer to an equal weighting with China in the MSCI Emerging Markets Index, reported Kleintop.

Political polls predicted that Narendra Modi, India’s current prime minister, and his party would win by a landslide. Instead, Modi won but his party lost its majority, and a coalition government must be formed.

The unexpected result raised concerns about future government policies, and “drove two days of dramatic trading as the benchmark Sensex index shot for the sky after weekend exit polls indicated a landslide, then tanked in response to live results,” reported Authers.

The Guardian called 2024, the Super Bowl of democracy.

This year, 40 countries will be holding elections. The countries encompass 40 percent of the world’s population and a significant share of the global economy. Ezra Fieser of Bloomberg reported:

“From Mumbai to Mexico City, the Year of the Election…is already burning investors, providing an early warning as elections in the European Union and UK near, and five months ahead of the U.S. presidential contest…In the U.S. — with a neck-and-neck rematch shaping up so far between President Joe Biden and Trump — traders have started bracing for heightened volatility...”

If you have questions about the way elections could affect markets or your portfolio, please get in touch.

Phone: (615) 709-8709

Fax: (615) 505-3306

eMoney

Charles Schwab

Advyzon

Emily Triano

Operations Manager

emily@ajadvice.com

Maya Laws

Operations Associate

maya@ajadvice.com

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