June 2023 Stock Market Commentary
Ethan Pollard | July 10 2023
Equity markets surged in June to cap a strong first half of the year, with the rebound in tech stocks continuing to drive indexes higher. The S&P 500, a broad benchmark for large cap US stocks, added +7% in June and is up +17% in 2023.
Smaller companies closed the gap on their large cap peers, gaining +8% on the month after a flat start to the year.
Overseas equities lagged slightly for June, with the MSCI ACWI ex-US index adding +4.5% for a +9.5% return in the first half.
Within fixed income, the Barclays Aggregate Bond index fell -0.4% in June (+2.1% YTD), as rates continue to creep higher with the Fed poised for at least one more interest rate hike after a pause during the June meeting.
Commodities rallied +4% in June, though they are the only major asset class in negative territory this year, with the Bloomberg Commodity Index down -8% YTD.
After a tick up last month, we saw no changes in our proprietary Three Dials outlook during the month of June, as we outline below:
- Market Sentiment and Momentum: (Positive ➕)
After rallying 20% from its October lows, the S&P officially entered a new bull market in June. Dating back to 1942, the average bull market has lasted over four years with a cumulative total return of 147.5%.
As investor optimism returns to equity markets, our Momentum Dial retains its Positive reading.
- Economic Fundamentals: (Negative ❌)
Consumer Confidence rose sharply in June as the outlook for prevailing business conditions in the US brightened despite near-term uncertainty. Moreover, outside of the US, economic projections are accelerating out of the 2022 lows, which would be a positive for global growth.
On balance, our Fundamental Dial remains in a Negative position as we await confirmation that the worst of the current economic malaise is behind us.
- Valuation: (Neutral ➖)
Global equities are fairly valued on a price-to-earnings basis, though the US growth sector remains an outlier driven by the recent surge in tech stock prices on lofty profit expectations.
For now, our Valuation Dial retains a Neutral reading.
Overall, our composite Three Dials reading takes a Neutral position, with one dial each in a Positive, Negative and Neutral position.
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