Equity markets built on a strong first half of 2023 in July, continuing to push upward.
Have the steady hand of the Federal Reserve (Fed) and the resilience of the U.S. economy created the much-hoped-for “soft landing” at the bottom of the inflation crisis? Time will tell – even as it declines, inflation remains above target levels – but the market seems willing to give the benefit of the doubt.
In July, equity markets built on a strong first half of the year and continued to push upward. The S&P 500 marked a 3% climb for the month and the Dow Jones Industrial Average reported 13 consecutive days of gains, falling one day shy of a record run that dates back to 1897. It’s the ninth straight year July has closed with positive market performance. The clarity of the Fed’s forward messaging has likely helped, allowing it to raise interest rates as part of its inflation-fighting program by another quarter of a percentage point in July without causing much of a blip. The target federal funds rate, now set between 5.25% and 5.5%, is the highest in 22 years.
“July was a microcosm of what has propelled the equity market most of this year – bearish sentiment fading on the back of a resilient economy, decelerating inflation, and better-than-expected earnings,” said Raymond James Chief Investment Officer Larry Adam. “And with the Fed near the end of its tightening cycle, a glimmer of hope for the elusive soft-landing led to a broadening of performance beyond just tech.”
It's worth reiterating that soft landings for the economy infrequently occur, and a confluence of data still suggests a mild – and brief – recession on the horizon.
Before we dive into the economic data and other topics of interest, let’s look at our year thus far.