Summer Time Markets

Will the warmer weather keep spreading sunshine on the stock market this summer?

Between now and mid-July, the stock and bond market focus could be squarely on inflation and the economy, as corporate profit reports are mostly in the rear-view mirror.

Entering 2024, investors were banking on 5 to 6 Federal Reserve Rates cuts.  Not this advisor!  As of now, most investors are thinking one, maybe 2 cuts this year as inflation has so far eluded the Fed’s 2% target.

During this shortened holiday trading week, the report of the week should be Friday, when we hear the Personal Consumption Expenditure (PCE) report, which is the Fed’s favorite.  Expectations are for an increase of .3% for the month and in the mid to upper 2% range over the last 12 months.

In addition to the PCE, we’ll hear economic data on the housing market and a few corporate earnings reports from HP, Best Buy, Dollar General, Costco & Ulta Beauty.

If the next handful of inflation reports (monthly CPI’s, PPI’s etc.) come in tame, and the economic data continues to only gradually slow, that can be positive for both the stock and bond markets.  We won’t have to wait to long for this to play out.

Mixed bag of stock performance last week, with the Dow dropping (2.22%), the Russell 2000 (1.41%) and foreign stocks joining the same direction.

The Nasdaq gained 1.40%, significantly aided by Nvidia’s blow out earnings report, and the S&P 500 finished flat .02%.

Oil has dropped from $86/barrel in April this year, to $78.46 last Friday.  When we hit $86 in April, that was the pre-curser to higher inflation readings that pre-empted a market pull-back in April.  Let’s hope for the opposite impact.

Bond yields are staying range bound with inflation uncertainly.  Last Friday, the yield on the 10-Year US Treasury finished 4.467%.  This Friday’s PCE report should be the main influencer this week as to the short-term direction of rates.

Medicare Advantage is funded by our government paying a certain amount to insurers, to manage the care of seniors.  As long as the insurance company costs are lower than the inflows, big profits.  Medicare Advantage has gained significant market share as it offers many “other” benefits that Original Medicare does not. 

Recent reports indicate the profitability of the Medicare Advantage Insurance companies may be dwindling.  We are seeing a post-covid surge in medical costs and the current administration has made a handful of policy changes that may be limiting what the insurance companies are receiving. 

Keep in mind, if you’re are on a Medicare Advantage program, the insurance company will dictate your network of Doctors, Hospitals, costs and benefits.

I realize Medicare Advantage does work for some, however for now, I remain a strong advocate for traditional Medicare with a Supplement and a Part D Drug program.  Having the unlimited choice of doctors and hospitals is extremely valuable, especially as we get a little older!!

Next, week, I’ll be writing our blog from Ranchos Pales Verdes, as I’ll be attending my annual Commonwealth Financial Network meeting.  Looking forward to the views of the Pacific Coast!!

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