WEEKLY MARKET UPDATE

It was an abbreviated start to the second half, but not without fireworks as Thursday and Friday saw starkly different jobs data for June and probably created more questions than answers.  On Thursday morning, payroll processing firm, ADP, shocked markets by indicating that a whopping 497K private sector jobs were added last month, more than doubling consensus expectations.  As a result, stocks and bonds both declined as investors increasingly expect additional rate hikes from the Federal Reserve to slow a US economy that has proven far more resilient, particularly on the jobs front, than most had anticipated.  The next day, however, the Bureau of Labor Statistics’ nonfarm payroll report told a very different story as it showed 209K jobs were created in June and missed expectations for ~225K (per FactSet).  This miss was especially noteworthy as it was the first time in 15 months that nonfarm payrolls had come in below expectations (see chart from Bespoke below) and the fears of a higher-for-longer interest rate environment from the Fed that had surged just 24 hours ago, cooled heading into the weekend.  With the next Federal Reserve policy announcements slated for July 26th, next week’s consumer price index (CPI) on Tuesday will be closely watched.  Interestingly enough, markets are implying over 90% odds for another 25-basis point rate hike later this month, despite the fact that economists are forecasting a 3.1% year-over-year headline CPI print, the lowest since March 2021 and down from 4% the month prior.

DEATH OF A PIONEER

"A good portfolio is more than a long list of good stocks and bonds. It is a balanced whole, providing the investor with protections

and opportunities with respect to a wide range of contingencies.”

~ Harry Markowitz ~

It did not receive much news, but last week Nobel Prize-winning economist Harry Markowitz passed away at the age of 95.  Mr. Markowitz is far from a household name, but his contributions to modern portfolio theory were groundbreaking, as his analysis pioneered portfolio diversification and has had immeasurable implications throughout just about every facet of wealth management.

Rest in peace, Mr. Markowitz.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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