July 2023
Summary
Stocks moved higher in July, and interest rates edged upward. While much of the country dealt with scorching temperatures, inflation continued to cool; June’s CPI of 3% marked a new low off 2022’s peak. Consumer confidence and the labor market both continued to improve. Following a pause in June, the Fed hiked the fund rates 25 basis points to 5.5%.
Equities
Emerging markets led the way in July, returning over 6%, buoyed by a rebound in Chinese stocks. In domestic markets, small cap stocks outpaced large caps, as investors grow more confident that the Fed can navigate a soft landing for the U.S. economy. In developed Europe, where fiscal policy has lagged the rest of the world, inflation pressures remain. Eurozone inflation for June measured 5.3%, while consumer prices in the UK grew 8% year-over-year.
Fixed Income
The Federal Reserve stayed steadfast in their efforts to bring inflation back to their stated target rate of 2%, raising the policy rate by a quarter percent. The 10-year treasury yield rose above 4% intra-month and finished July at 3.96%. Credit outperformed as spreads ground tighter, but bonds in aggregate failed to gain any traction during the month in the face of policy headwinds.
1 – Russell 1000, 2 – Russell 2000, 3 – MSCI EAFE, 4 – MSCI Emerging Markets, 5 – Bloomberg US Agg, 6 – Bloomberg US Long Gov/Credit
7 – Bloomberg US Corporate High Yield, 8 – Bloomberg Gold Subindex, 9 – Bloomberg Commodity
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