Rising Temperatures

by Mark Lebida of Journey Strategic Wealth, 7/10/24

“If you saw a heat wave, would you wave back?” -Comedian Steven Wright

asset class returns

Rising Temperatures

New Jersey, like much of the rest of the country, was mired with a heat wave in June. According to data from Newark Airport, just 15 miles from our offices, there were 11 days with high temperatures over 90 in June and just five days that didn’t reach 80-degree highs. Heat indexes that factor in humidity have been particularly dangerous over the last month. This was the second warmest June since 1931, about 4.8 degrees above normal. While the temperatures were rising, the U.S. stock market continued its climb higher as well. The S&P 500 returned 3.5% and Emerging Market stocks delivered an impressive 3.9%. Bonds also returned positively in June.

Try To Keep Cool

The May inflation report showed a Personal Consumption Expenditures (PCE) registering a +2.6% year-over-year increase and a -0.1% month-over-month decline. That reading was in line with expectations, supporting the seeming consensus view that at least one Fed interest rate cut is expected this year. The Fed is supposed to be independent and not influenced by politics. Nevertheless, the upcoming election is another factor that could contribute to the timing of future rate cuts. We don’t think this Fed will want to go down in history as both keeping rates too low for too long as inflationary pressures mounted in 2021 and keeping rates too high for too long as the economy slowed in 2024. Rate decreases are coming from the cooling economy, but the pace of the cuts and when the Fed will start a rate-cutting cycle are still uncertain.