Mid-Week Market Minute 7.19.23

Positive Returns Continue; Focus Turns to Q2 Earnings

Stocks continued their upward trajectory this week as the Dow Jones Industrial Average posted its seventh consecutive day of positive returns on Tuesday. For July, all major indices are firmly in positive territory with the S&P 500 higher by about 2.5%. After lagging the large cap benchmark over the first half of this year, both small cap and emerging market stocks have led the way higher in July with the Russell 2000 and MSCI EM indices higher by more than 4.6% and 3.7%, respectively. International developed stocks kept pace as well, with the MSCI EAFE higher by about 2.7% through the first half of July. 

A perfect storm of positive developments in the market have been the catalyst behind this year’s impressive performance so far. Inflation continues to show signs of deceleration, while both the labor market and consumer spending remain resilient. On Tuesday, both headline and core retail sales expanded for the third consecutive month. Meanwhile, the Federal Reserve is approaching the end of this rate-hiking campaign, with just one additional rate hike expected at the FOMC meeting next week. For now, investors are optimistic the Fed can achieve its mandate of slowing inflation without pushing the economy into recession. 

Over the next few weeks, corporate earnings will be a primary focus for the markets, where second-quarter earnings are expected to decline by approximately 7% compared to the second quarter of 2022. In the early innings of Q2 earnings season, corporate profits from the financial sector appear to be holding up quite well despite the regional banking turmoil earlier this year. Of the companies in the S&P 500 reporting results, 82% have exceeded expectations, according to FactSet.

Source: GSAM, CNBC, JPMorgan

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Indices are unmanaged, represent past performance, do not incur fees or expenses, and cannot be invested into directly. Past performance is no guarantee of future results.