Markets were mixed last week as breadth continued to widen, but volatility picked up.
Several external factors seem to be affecting markets of late. The previous weekend, there was an assassination attempt on presidential candidate Trump and this past weekend, President Biden withdrew his name from the Democratic presidential ticket. So far, markets are absorbing the news calmly in early futures trading. In terms of market breadth, we need to see more movement from the Mega-cap Tech names into cyclicals, small caps, and mid-caps. After comments made by the Fed, J.P. Morgan CEO Jamie Dimon, and presidential candidate Trump, futures on a September rate cut did dip just slightly from a high of 94% to 91%.
We are also entering the part of the year that seasonality suggests is soft for equities.
The S&P 500 Index tends to dip during this time period in years where a presidential election occurs. While it’s still early, corporate earnings are looking good for the second quarter. So far, 80% of S&P 500 companies have reported earnings above estimates. We get the first look at GDP for the 2nd quarter this week and the Fed is projecting +2.7% for the quarter. Don’t be surprised if there is more market volatility this week if seasonality holds true.
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