Wednesday, July 15, 2024

This week's insights from Simplicity Wealth's

Thomas Rozman, CFA, CAIA | Partner & Chief Investment Officer

Matthew Opsal | Senior Manager Research Analyst

Week In Review

Federal Reserve Chairman Jerome Powell provided testimony to both the Senate Banking Committee and House Financial Services Committee on the state of the economy. The tone of the pointed discussion took a notable about-face from previous statements, as the chairman expressed concerns for sustaining economic growth if interest rates were held too high for too long. While stopping short of declaring victory over inflation, Powell intimated that the FOMC may need to pursue a less restrictive stance regarding monetary policy. The subsequent update on consumer inflation couldn’t have provided a better encore to Powell’s assessment. The Consumer Price Index declined 0.1% for the month of June and increased just 3% from a year ago, its lowest level in more than three years.3 The optimistic trend provides support for a September rate cut. Treasury yields fell across the curve on the news. Constructive corporate earnings, primarily from money center banks, added to the euphoric narrative. The S&P 500 hit a new 52-week high of 5,655, rising +0.9%.

This Week

The financial markets have an abundance of economic reports to survey, including updates on U.S. retail sales, housing starts, industrial production, and U.S. leading economic indicators. Corporate earnings releases will also kick into high gear and may shed light on current equity valuations. Any earnings disappointments could increase market volatility.

Portfolio Themes

We’ve written about “home bias investing” and the tendency for investors to prefer domestic stocks over international stocks. Avoiding international companies not only limits opportunities but also increases portfolio risk. Today, the relative valuation level of the MSCI All Country World ex-US index versus the S&P 500 index appears to be at a twenty-year low. Simplicity offers access to third-party model portfolios that may include diversified exposures to developed and emerging international markets.

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Data: Unless otherwise noted, data for charts, graphs, and tables is sourced from Morningstar Direct. Portfolio Themes chart sourced from J.P. Morgan Asset Management.

1Style box returns use various Russell indices tied to specific areas of the market cap (vertical) and style (horizontal) spectrums.

2 Index Statistics: P/E TTM – Calculated by dividing an investment’s price by the trailing 12-month earnings per share value. Yield – Expected dividend-per-share divided by current share price. Table statistics are updated monthly. MSCI indices represent broad global and international equity markets. Indices are typically not available for direct investment, are unmanaged, and do not incur fees or expenses. Past performance does not guarantee future results.

3 CNBC. Weekly commentary and investment advisory services are provided by Simplicity Wealth, LLC a SEC Registered Investment Adviser. Registration does not imply a certain level of skill or training. The information provided is for informational purposes only and does not constitute any form of advice or recommendation. The information contained within has been obtained from various sources and is believed to be accurate at the time of publication.