Happy Mid-June update everybody. If you like rain and clouds everyday you’re having an excellent summer. The rest of us are disappointed.
Let’s check in on the markets and the notable non-freakout that (hasn’t) happened.
-Kevin
The Market Shrugs Off Bad News
The S&P 500 is up about 2% over the past two weeks and has settled in above 6,000 for the first time. While that’s a pretty good number for any two-week-stretch, it’s most notable for the fact that there’s been a lot happening in the world over that time period.
For now, the markets seem be entirely shrugging off the war between Israel and Iran. Either ‘the market’ thinks it will be over shortly, or think the impacts won’t be felt economically (ie, oil production / prices won’t be negatively affected.) (This is a friendly reminder that when we speak of “the market” we’re actually referring to millions of individual and institutional investors making decisions in their own best interest; it’s an abstract concept but essentially just a ‘wisdom of crowds’ type of thing.) We’ll see if that prediction comes to pass, but for now it appears to be relative non-factor as far as investing is concerns.
Inflation came in a bit lower than expected, which is good news, but it also puts the pressure back on the Fed. Everyone’s watching Jerome Powell now to see if we’re finally getting those rate cuts or if we’re stuck in wait-and-see mode again for the foreseeable future.
The Fed’s Tightrope: Cautious Steps Ahead
The Federal Reserve is in a tough spot—balancing a slowing economy with still-sticky inflation. While inflation has cooled compared to the highs of 2022, it hasn’t dropped fast enough for Powell’s liking.
They’re trying to avoid a scenario where they cut too early and inflation spikes again—or hold too long and strangle growth. For now, the Fed seems content sitting on their hands, watching the numbers, and hoping the economy threads the needle between recession and inflation.
Investors, meanwhile, are reading between every line of every Fed speech, looking for the smallest clue. Expect more sideways movement and Trump vs Powell drama with cautious optimism unless a major shift in jobs, inflation, or GDP shakes things up.
Tax Bill: TBD
“Laws are like sausages. It’s better not to see them being made.“ – Otto von Bismarck
I broke my self-imposed rule and dug into the latest proposals coming out of the Senate to see what changes they’re proposing to the House version of the tax bill. I did so knowing full well that I was wasting time, since a good portion of those proposals will wind up changing or being scrapped altogether when they finally reconcile the two versions together. But alas, I’m a glutton for punishment. For now, it appears that we’re going to wind up with a largely status quo type bill that extends the tax rates we already had – most of the tinkering will affect very specific segments of the population rather than everybody (ie, above-average-income taxpayers living in NY/NJ).
If they actually meet their July 4 deadline I’ll hopefully have more details to share next month, but don’t hold your breath.
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