June 2023 Market Watch

June 6, 2023

Market Health Indicator - Current Score

The Market Health Indicator (MHI) measures market health on a scale of 0 - 100, analyzing various market segments such as economics, technicals, and volatility. Higher scores indicate healthier market conditions.

It was the tale of two markets as stocks diverged in May…

On the positive end were large tech stocks, as the artificial intelligence buzz catapulted chipmakers and other AI-linked companies higher. Unfortunately, most everything else didn’t fare as well, as eight of the 11 sectors in the S&P 500 finished the month in the red (and are in negative territory year-to-date through the end of May as well).

This trend resulted in a wide spread among major US stock indices. The Nasdaq 100 soared 7.61% and the S&P 500 gained 0.43%, supported by larger growth companies. However, small-cap stocks were down 1.09% and the more blue chip Dow Jones Industrial Average dropped 3.48%.

Following the latter group lower, international stocks faltered in May with losses of 3.73% for developed international stocks and 2.96% for emerging markets. Disappointing economic data created some headwinds overseas. Eurozone inflation remained stubborn as it ticked higher from 6.9% to 7.0%, and manufacturing data fell to its lowest point in three years while pointing to a contraction in activity.

Fixed-income asset classes were also lower for the month as the 10-year Treasury yield jumped from 3.44% to 3.64%. With interest rates moving higher, the US aggregate bond market declined 1.09%, snapping the first two-month winning streak bonds have had since mid-2021. Behind rising rates was an increase in rate hike expectations for the upcoming June meeting as investors dissected various inflation reports.

Despite the negative skew for the month (outside of tech stocks), markets have remained more stable so far in 2023 compared to last year. There’s reason to be optimistic as the Fed seemingly nears the end of its rate hiking campaign, but it’s not unreasonable to expect some volatility along the way as markets attempt to claw their way out of the hole from 2022’s sharp losses. Having a plan in place can provide direction when market signals are mixed, helping emphasize the long-term even amid short-term divergences.

Is this real life? If this just fantasy?

Not just iconic Queen lyrics, many people are starting to wonder this about the recent AI hype.

Everywhere you turn it seems another company is releasing a new artificial intelligence initiative. Nvidia, one of the largest beneficiaries from this recent trend, mentioned AI over 100 times in its most recent earnings call.

Some experts have drawn comparisons to the early days of the gold rush, even calling it the fourth industrial revolution with more upside ahead. However, others suggest exercising caution before jumping on the bandwagon, pointing to recent failed projects in the metaverse and cryptocurrencies. Some even worry about a Terminator or Matrix scenario.

While opinions are mixed on the role of AI going forward, engineers are still working on fixing issues with misinformation, copyright infringement, and privacy concerns.

Turns out pets don’t have to ruff it as much as humans…

At the onset of the pandemic there was a surge in the number of pet adoptions as people were looking for companionship while stuck at home.

Now, while consumers have been cutting back spending on themselves due to lingering inflation, they’re not skimping on their fur babies. Pet-product retailers have noted steadier sales in contrast to a broader retail slowdown.

The US pet market it estimated to be worth $124B, and experts believe it could reach $200B by 2030. Healthcare services, such as vets and insurance, have been driving the recent growth.

Even Walmart is jumping into the market, entering a deal with veterinary telehealth provider Pawp as a perk for Walmart+ members.

As companies look to strengthen customer loyalty, pet loyalty could be the key.

Fun Facts

• The Onion Futures Act bans the trading of onion futures in the US. It was enacted in 1958 after two traders manipulated the onion market.

• Focusing on something (i.e. reading, watching TV, or listening to a podcast) causes you to blink approximately 60% less than normal.

• While technopreneurs dominate the headlines, fewer than 10% of billionaires are under the age of 50.

• Don’t forget to book those tee times. June 18th is Father’s Day!