The outlook for US indices is still bullish, but headwinds like stubborn inflation data, inflation expectations, a less inclusive rally, and a seasonal consolidation limit the extent that indices are likely to rise in Q3
Forex Update: As of 20:00, these are your best and worst performers based on the London trading schedule: 🇦🇺AUD: 0.36% 🇨🇦CAD: 0.16...A Less Inclusive Rally is not Necessarily Bearish but can Slow MomentumFundamental Summary for Equities in Q3:
As can be seen from the chart below, whenever the percentage of S&P 500 stocks trading above their 200 SMAs drop from 80%, there is more likely than not a further deterioration in sharefor the majority of index. In 2018, 2020 and 2022 the percentage of stocks above their 200 SMAs stalled and reversed, coinciding with a lower reading for SPX at the end of each year.
Thus far equity markets have proven robust, printing all-time highs despite rate cuts constantly being pushed back due to stubborn inflation. The Fed raised its inflation expectations when the updated forecasts were released at the Junemeeting and indicated that it plans to lower the Fed funds rate just once this year, down from three projected in March but the decision between one or two cuts was a very close one.
Generally speaking, election years are great for the stock market. Data going as far back as 1949 sees a typical election year adding around 7% on average, while years involving a sitting president running for reelection have climbed nearly 13% on average. We’re only halfway through 2024 and already seeing gains of 15% towards the end of June. July and August tend to consolidate or exhibit a slight rise before September sees a broader continuation of the yearly bull trend.
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