Equities marched higher in June for a fifth consecutive monthly gain, as the global economic recovery continues to take shape. The S&P 500, a benchmark for large cap US stocks, gained +2.3% on the month and is now up +15.3% at the halfway point of the year.
Small- and mid-cap stocks advanced 1.9% in June per the Russell 2000 index, which is up +17.5% this year. Overseas equities fell -0.7% on the month, bringing the MSCI ACWI ex-US index return to +9.2% for the year. Fixed income markets continued to rally, despite indications from the Fed that rate hikes may resume earlier than initially anticipated in order to help combat a potential overheating of the US economy. The Barclays US Aggregate Bond Index was up +0.7% in June for a -1.6% return YTD. Gold sold off this month, with prices declining -7.2% for the month (-6.6% YTD).
We saw no changes in any of our proprietary “Three Dials” readings during the month of June, each of which are summarized below:
Despite a mid-month wobble in the aftermath of the Fed’s interest rate commentary, equities continue to hold firm to long-term support levels. With technical strength intact, our Momentum Dial remains in a “Positive” position.
We remain wary of equity valuations in this current environment, which could hamper stock returns despite a resurgence in earnings. Based on lofty valuations compared to historical norms, our Valuation Dial sits in a “Negative” position at this time.
On balance, our Three Dials composite reading takes a “Cautiously Optimistic” view into the second half of the year, as strong showings in the areas of Momentum and Economic Fundamentals are balanced by Valuation concerns.
Sources:
https://www.conference-board.org/pdf_free/press/US%20LEI%20PRESS%20RELEASE%20-%20June%202021.pdf
https://www.oecd.org/economic-outlook/