[Market Outlook] The Market Fireworks Continue!

What’s In Store For the Second Half? [Company Logo] The Market Fireworks Continue! What’s In Store For the Second Half? By Donn Goodman and Keith Schneider [image] Hello Gaugers. Hope you had a profitable and enjoyable week. All of us wish you and your families a safe and relaxing 4th of July (Independence Day) celebration. We should all be grateful for our freedom and the opportunity (and hope) of living in a great country! [image] June ended with a good week in the markets. You may not be aware but investing (long) in the market BEFORE a major holiday tends to have an upward bias. In fact, there are seasonal and calendar effects (as well as Presidential that we have consistently covered through the weeks and we have a strategy TOM, that takes advantage of this effect). Therefore, it was no surprise that this past week we enjoyed an upward bias and positive returns (the best surprise was the small cap rally that continued from earlier in June). This was certainly helped and boosted by the economic news that showed the May Core PCE (Personal Consumption Expenditure) index that came in at 4.6% versus 4.7%, the number expected by most economists. Even though that data point was a mere 0.1% less than expected, it sent the signal that the Fed Chairman and his Open Market Committee might evaluate the slowing inflation scenario as one more case for pausing or skipping more rate hikes. Investors stepped up their buying. Or at least this is what market commentators conveyed. My interpretation: There remains over $5 trillion in money market funds. People see the daily financial news that the markets continue higher. FOMO (fear of missing out) takes over, and they start putting money to work in the markets. Not knowing what to buy, they turn to purchasing the biggest and most well known stocks (see description of the Big 7 below). Also, big money managers and institutions were rebalancing and executing window dressing maneuvers so that they could show their clients that they got rid of the poor performing stocks and were increasing the weightings of the best performers. Their hope is that if they are underperforming for the year, they can demonstrate to their clients that they have made recent stock and asset category decisions to put them in a more favorable position. Doesn’t always work. The last (and perhaps most significant) factor at the end of a month/quarter is that companies are buying back their stock (reducing dilution to increase the potential ROI of the stock price) and like stealth operators in the middle of the night, they do this unnoticed. With lighter than normal volume (people are on vacation and Wall Street managers start their weekends early), these subtle moves amplify the upward bias in the last week of June. June was an excellent month for the Bulls. We ended the month and the quarter on Friday with a surge higher in stock prices. This surge came after a pause in the middle of the month that gave many market technicians, (or so they thought) proof that we would start another leg down. Boy were they wrong, as the market over the last two weeks showed its strength and a broadening out. Small caps started an impressive run earlier in June . That was evidence that small companies are shaking off higher interest rates (and threats of still higher interest rates) and seeing growth and pricing power that helps the soldiers line up with the generals. This year, so far, has certainly been about the Mega Caps. The big 7 (Amazon, Apple, Google, Microsoft, Netflix, Nvidia, and Tesla) all had a good quarter and defied the pundits who say they are too big to continue growing at above average rates. Apple hit the $3 trillion mark making it the first company to do so and its brand the most valuable in the world (I confess, I am NOT an Apple user). We wanted to provide a summary of just how “good” these markets (and their different segments) have been: [image] I don’t know too many investors who would have thought these numbers were possible coming out of 2022. Let’s recap just how resilient this market has been: June: - S&P 500 up 6.1%, best month since January 2023 - NASDAQ up 6.2% fourth consecutive positive month - DOW up 4.4%, best month since November, 2022 Second Quarter, 2023 - S&P 500 up 8.3%, third straight quarter of gains - NASDAQ up 15.1%, back-to-back positive quarters - Dow up 3.4%, third straight winning quarter. Year-to-date (first half of 2023) - S&P 500 up 15.9%, best first half since 2018 - NASDAQ up over 38%, best first half since 1983 [image] Please review the chart above. You will see the obvious and significant disparity between GROWTH and VALUE on the blue and green lines (Russell 1000 Growth-Russell 1000 Value). I cannot recall this big of a difference between growth and value (over 23+%) in a long time. The Wilshire 5000 (made up of 5,000 stocks) also exhibits more broad-based market participation than most people expect or having been talking about. See chart below: [image] Investors entered 2023 fearful and are now experiencing greed. Use the links below to continue reading about economic indicators, hot sectors influencing the markets, and the Big View bullets and video by Keith. [Click here to continue to the FREE analysis and video.]() [Click here to continue to the PREMIUM analysis and video](. Best wishes for your trading, Donn Goodman CMO, Market Gauge Asset Management Keith Schneider CEO, MarketGauge P.S. 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