The presidential debate was the big story of the week and revealed a mild market preference for former President Trump. Notably, during the 90 minutes of the debate when there was no other market news, S&P 500 Futures rose 10 points, due to Trump’s business-friendly policies despite his higher-policy unpredictability. President Biden’s odds of winning dropped in all the betting markets and speculation is stirring whether he will ultimately be the Democratic nominee.
On the economic front, recent indicators present a mixed but stable landscape. Jobless claims remain around 240k but don't necessarily signal distress; this could be attributed to seasonal adjustments or anomalies such as the Juneteenth holiday impacting reporting. Manufacturing data and the Purchasing Managers' Index (PMI) data provided some positivity, countering softness observed in the housing market due to persistently high mortgage rates.
Q2 gross domestic product (GDP) forecasts have been adjusted downwards towards the low 2% range, reflecting a recalibration to more moderate growth expectations. This adjustment aligns with a broader trade deficit and tempered expectations for economic expansion in the second quarter.
The tech sector, notably companies like Nvidia, continue to draw significant attention and investment, showing resilience and potential for growth despite broader market volatilities. This aligns with a trend where high-performing tech stocks drive market interest but also highlight the sectoral disparities within the broader economy.
Looking ahead, all eyes are on the Federal Reserve's (Fed’s) upcoming meetings and subsequent economic data releases. If inflation continues to moderate, as the data on the Personal Consumption Expenditures (PCE) deflator indicated, I can see the first Fed rate cut taking place at the September meeting. There is still an upward tilt to the equity market.
With the July 4th holiday, we will not have a market commentary next week, but if you are looking for an interesting podcast during your holiday travels, Jeremy Schwartz and I were guests on the latest Compound and Friends podcast. We discussed my views on the Fed and inflation, long-term research on the markets and valuations of technology stocks, whether AI is a bubble, and we closed on the international markets. This was a fun interview —check it out!
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Professor Jeremy J. Siegel
Senior Economist to WisdomTree and Emeritus Professor of Finance at The Wharton School of the University of Pennsylvania
Past performance is not indicative of future results. You cannot invest in an index. Professor Jeremy Siegel is a Senior Economist to WisdomTree, Inc. and WisdomTree Asset Management, Inc. This material contains the current research and opinions of Professor Siegel, which are subject to change, and should not be considered or interpreted as a recommendation to participate in any particular trading strategy, or deemed to be an offer or sale of any investment product and it should not be relied on as such. The user of this information assumes the entire risk of any use made of the information provided herein. Unless expressly stated otherwise the opinions, interpretations or findings expressed herein do not necessarily represent the views of WisdomTree or any of its affiliates.
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