Random Thoughts

The market’s focus for the month is the Fed, with investors hoping for a replay of 1995, in which the end of a Fed rate-tightening cycle was replaced by a rate-easing period.

The S&P 500 jumped 34% that year but saw nearly 2/3rds of that advance coming ahead of the initial cut in early July.

A déjà vu performance would still imply a double-digit price rise for the S&P 500 in the final five months of the year, provided the FOMC follows through with the highly anticipated cut later this month – which we think they will.

The strength of the June jobs report likely took the 50-bp cut off the table for now but could be reconsidered should this week’s inflation reports and other rest-of-month data point to a rapidly decaying trajectory of global growth.