As with every election year, everyone is trying to figure out who has the edge in the Presidential race. Currently, President Trump has a 1% lead. Betting markets show a tossup, but reality is that we are a long way from decision time. For the right side you will see the big issues; economy, immigration, law and order, are in favor of President Trump. President Biden will favor abortion and climate change in an effort to return younger voters to the democratic side. The recent guilty verdict seems to be having a small impact in the polls. Undecided voters may have a difficult time choosing sides, but the intensity of those who do support a specific side is increasing. We expect the debates to have a potential small impact on voter sentiment.
Consumer sentiment in the market is changing. We are seeing more cautious consumers spend less on discretionary items such as eating out at restaurants. Restaurants are starting to cut prices to try to encourage people to leave the house. Airline travel has dropped by 9.1%, leisure products are down 6.9%, and consumer staples are up 4.4%. Part of the airline slowdown is strong demand, but overcapacity of flights is urging pricing pressure downward. Leisure products like boats, RV and other higher end products have been affected by the increase in cost to build and service. The other issue is these products typically use credit to buy these products and current has had a big impact. High end retail seems to be holding up for more high-income earners. There is a significant discrepancy in spending of high-income households versus low-income households. For example, higher earners tend to have stable house costs by owning homes, whereas lower earners have increasing rental rates to pay.
The Fed has been taking a more patient approach to the rate cuts that many investors have been expecting. Last December, it was expected that there would be over 7 more rate cuts. However, now there is only the expectation of only 1-2 more rate cuts. The Fed’s speakers have been looking for more data to ensure that future cuts will be the right move for an ever-changing market. There are many different pieces of important information, such as the June Employment report, and June/Core CPI numbers that will gives the Fed a better idea into the next year.
The stock market has had an excellent start to the year through the first 5 ½ months. The Dow hit 40,000 for the first time and the NASDAQ and S&P 500 are at all time highs. There have been some top companies, such as Nvidia, that are performing stock splits. It is important to note, there is no fundamental or financial difference to investors before and after stock splits. There are a few main reasons a company may perform a stock split. The first reason is that a lower stock price makes it more affordable for the retail investor, and makes shares more attractive for them since they are lower priced. From an options perspective (which we don’t do much of), the stock splits make them more affordable too since most options contracts are for 100 shares. For companies, it’s easier to give stock bonuses to employees if shares are cheaper. The final reason is that lower priced shares can help companies be a part of certain indexes like the Dow.
Any opinions are those of Jeffrey Fehrman and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The information contained here does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance may not be indicative of future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
June 2024 – Market Update
