X Marks the Spot

By Aoifinn Devitt, CFP® – Chief Investment Officer

It was a blockbuster cinema weekend as “Barbenheimer” swept box offices, leading to the fourth biggest box office weekend in US history.  However, as for much of the past two years, the real drama lies elsewhere – away from Malibu Dream Houses and Manhattan- and instead, in the halls of the Fed.  This week we again watch for the next move in a captivating chess game – the Fed v. inflation – when inflation surprised with its softball number at the latest print, the Fed, and markets may have been caught off guard.  Did this suggest that monetary policy and higher rates were already working – pleasingly – or was it a transitory “pause” in a relentless upward pressure on prices. Now that the Fed has the next move, it is largely expected to be a rate rise, followed, maybe by a further pause, that lies ahead.  Despite a still-inverted yield curve, it currently does not appear that a “pivot” or change in direction to drop rates, is on the cards.

In equity markets the same euphoric mood lifted stocks such as Alphabet and Meta upon earnings announcements, as chip makers and companies like Visa tied to a “resilient” consumer rallied. This marks the 12th straight day of market positive performance for the Dow – its longest winning streak in more than 6 years, and its highest close since February of 2022.

Source: Morningstar as of 7/25/2023

Meanwhile curveballs, not chess, were the order of the day for Tesla CEO Elon Musk who rebranded Twitter to X in a largely unanticipated move, executed with the usual dash of drama and anti-establishment flourish. The swift dismantling of a well-known internet brand which follows the rebranding of Google (Alphabet) and Facebook (Meta) is another example of the transient and fast-paced nature of our new technology and social media ecosystem.

The summer is proving to be a hot one around the US and as we remain in the dog days, we may see the heady energy of the season drown out some of the niggling concerns.  These concerns have rumbled for months, and signal nothing new – but the confounding strength of the US consumer, the stock market and the jobs picture increasingly seem too good to be true. Like the cheerful blue bird that was once the logo of a firm formerly known as Twitter, these cheerful signals could come crashing to earth.



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