Equity markets continued their post-Liberation Day recovery, with the S&P 500 notching its first record high since February as investors increasingly look to put Trump’s trade war in the rearview mirror.
The blue-chip index gained +5.1% in June and is now up +6.2% for the year.
Smaller company stocks added another +5.4% this month, though the Russell 2000 index is still down -1.8% year-to-date.
International stocks ended a strong first half of the year with a +3.4% monthly gain, adding a whopping +19% through the first six months.
Bond markets rallied as inflation concerns eased with a second consecutive month of soft CPI data, sending the Bloomberg Aggregate Bond Index up +1.5% in June (+4% YTD).
Commodities ended the month up +2.4%, led by a volatile month for oil prices with escalating conflict in the Middle East. The Bloomberg Commodity index is up +5.5% year-to-date.
With a return to bullishness in equity sentiment, we have one change in our proprietary Three Dials allocation methodology, which we detail below:
- Market Sentiment and Momentum: (Upgraded to Positive)
The 89 trading days between record highs on the S&P marks the fastest ever recovery after a decline of at least 15%, indicating the swiftness with which enthusiasm has returned to equity markets.
With international equities also on a tear this year, our Momentum Dial has returned to a Positive position after three months at Neutral.
- Economic Fundamentals: (Negative ❌)
Despite the optimism in equity markets, economic data continues to lag, with weekly unemployment claims hitting a two-year high while new home sales saw their biggest monthly drop in over three years.
With the average consumer still feeling uncertain about the future, our Fundamental Dial remains in a Negative position.
- Valuation: (Negative ❌)
Despite a fierce rally on the S&P, earnings growth expectations for Q2 have been cut in half, sending forward price-to-earnings ratios back toward recent highs after a brief reprieve. As such, our Valuation Dial stays Negative.
On balance, our composite positioning remains somewhat defensive, with one dial now in a Positive position but two dials remaining Negative.
Sources: Morningstar
Disclaimer: Our intent in providing this material is purely for informational purposes, as of the date hereof, and may be subject to change without notice. This article does not intend to constitute accounting, legal, tax, or other professional advice. Visitors and readers should not act upon the content or information found here without first seeking appropriate advice from a trusted accountant, financial planner, lawyer or other professional.
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