- U.S. markets pushed higher in June.
- May’s leaders and laggards reversed in June.
- Technology and Energy were the biggest winners in June. Whereas Value, Materials, Industrials, and Financial were the laggards.
- Another reminder why staying diversified is so important.
- Probably the biggest news of the month came from the FOMC meeting, where there was some indication that that the Fed may begin to raise rates in 2023. After an initial spike in rates after the meeting, rates actually continued lower.
Why It Could Keep Going Higher
- There are still 8 million Americans that remain unemployed.
- Consumers have loads of excess savings to spend.
- Businesses have a lot of inventory to build back up.
- Continued vaccine rollout.
- Additional stimulus.
- The Consumer Price Index (CPI) increased again for the third straight month.
- The Consumer Confidence index held steady at a very optimistic level.
- The U.S. unemployment rate continued to improve.
- U.S. Home Sales increased in May at its fastest pace on record and a reached a new high.
- Retail sales actually declined a little in May vs April. However, looking at the details it was because there was shift away from spending on larger ticket items but still large gains in spending at restaurants and bars.
What We Are Doing
We have continued to maintain a well-diversified allocation. We are still overweight equities and underweight fixed income, but have reduced some of that overweight. We’re still investing in areas that should benefit from the world returning to normal, as well as potentially higher interest rates, such as industrials, banks and value. However, we believe longer term trends will continue to favor technology that we added to during their recent sell off.
We have reversed some of our underweight to developed international equity as we believe their outlook is improving. With interest rates anticipated to rise over the next couple of years, we plan to maintain our underweight to investment grade fixed income and overweight to high yield. Going forward we continue to favor high yield, preferred stocks, private debt and private real estate as a way to create income.