July 7, 2023
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.
Last year the July newsletter started “We are halfway through 2022, and just saw arguably one of the worst 6-month time periods ever for financial markets (when looking at both stocks and bonds combined.)” Apparently markets took that personally, capping off a strong first half of the year this time around.
US stock indices soared higher in June after more of a split decision last month. Small-cap stocks led the surge with the Russell 2000 gaining a solid 7.95%, broadening the participation in this year’s rally. Not too far behind were the Nasdaq, S&P 500, and Dow Jones Industrial Average indices, gaining 6.59%, 6.47%, and 4.54% respectively.
International stocks experienced some positive momentum as well, with gains of 4.43% for developed international stocks and 4.74% for emerging markets. Persistent inflation and more aggressive rate hikes caused companies overseas to lag their US counterparts, but the broader risk-on sentiment was enough to pull global stocks higher despite some of the recent disappointing economic data.
While stocks widely climbed higher, fixed-income asset classes were mixed. The US aggregate bond market declined 0.36% as the 10-year Treasury yield rose from 3.64% to 3.81%. Despite the pause in June, markets are expecting the Fed to resume rate hikes in July, which created some headwinds for traditional bonds. However, high-yield bonds gained 1.90% following riskier assets higher for the month.
It’s been a much smoother year thus far, but it’s not unreasonable to expect a few bumps in the road along the way as markets continue to recover from the 2022 bear market. Forecasts going into the second half of the year are mixed, with some experts saying we’ll see new all-time-highs and others noting markets may be overheated and due to reverse lower. Having a plan in place can help keep the focus on your specific long-term goals regardless of short-term market prognostications.
Global oil prices started including US oil for the first time in June.
Brent crude oil, which is the primary benchmark for calculating approximately 80% of global sales, has historically used European oil sourced from the North Sea as a pricing proxy.
However, as Brent oil fields continue to deplete reserves, exchanges turned to the US to provide more liquidity and pricing stability.
So far in 2023, the US has shipped a record number of West Texas Intermediate (WTI) crude barrels to China and Europe, which have become more reliant on American oil since the Russia-Ukraine war.
This marks a major turnaround as the US imported 60% of its oil in the early 2000s, compared to just 40% today. Some analysts say the move could help further boost US exports.
New York City is set to become the first in the US to charge a congestion toll in attempt to curb rush hour traffic. The city could start tolling vehicles entering Lower Manhattan, one of the world’s busiest traffic districts, as early as April 2024.
The Metropolitan Transportation Authority (MTA) hasn’t set a fee schedule yet, but a report released in August 2022 showed proposals ranging from $9 – $23 during rush-hour and $7 – $17 during non-peak hours. According to the MTA, the fees would raise an estimated $1 billion per year while reducing the number of cars on the road by 20%.
Proponents point to similar policies in cities like London, Stockholm, and Singapore helping unclog roads, while opponents worry the tolls could hurt lower-income drivers and lead to a decline in business revenues.
Leaders in other major US cities, such as Los Angeles, will be watching closely and could adopt similar models amid aging public infrastructure.
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