Trade Spotlight 7/1

Half the year is gone.

And not much has changed.

We entered the year with the same narratives that drove market movements throughout 2023, inflation, yields and an equity bull market that just won't quit.

Well it's July 2024, and the same things hold true.

The Fed has paused, and inflation has become awfully stubborn.

However, most outlooks on inflation remain well grounded and its widely expected that Fed cuts will come into the picture soon.

And that has led to:

A bumper year for equities, with the Nasdaq roaring 18% higher YTD off the backs of the AI craze, and the S&P 500 not too far behind at 15% gains.

But these gains can be deceiving.

The equal weight S&P 500 is up just a mere 3% for the year, while the Russell 2000 index is up a whopping 0.05%.

Why?

Yields.

The 10 year treasury yield reached a peak over 5% last October, this coincided with a bottom in equities, from which we saw the S&P 500 rally nearly 15% higher in just 6 weeks to close out 2023. In that time frame yields fell all the way down to 3.80%, fueling this rally.

Thats classic movement in the market, yields fall, equities rally.

But yields reached a bottom at the end of 2023 as well, which stopped most equities in their tracks, except the major AI names of course.

Yields have now risen to new monthly highs this week, with the 10yr yield right back to 4.50%.

Despite this, equity markets have held tough, in fact, they have not only not experienced losses, they have pushed out strong gains for 1H '24.

So what?