S&P 500 and Dow Jones Trade Within 5% of Their All-Time Closing Highs
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Monthly Market Summary
The S&P 500 Index gained 3.3% in July but underperformed the Russell 2000 Index’s 6.1% increase. All eleven S&P 500 sectors traded higher, led by the Energy, Communication Service, and Financial sectors.
Corporate investment grade bonds produced a 0.1% total return in July, underperforming corporate high-yield bonds’ 1.1% total return.
The MSCI EAFE Index of developed market stocks rose by 2.7%, underperforming the MSCI Emerging Market Index’s 6.0% return.
S&P 500 Trades Toward its All-Time Closing High from January 2022
The S&P 500 extended its winning streak to five months in July, bringing its year-to-date total return to 20.5%. The S&P 500 has recovered most of its losses from 2022 and is trading less than 5% below its all-time closing high set in January 2022. On a related note, the Dow Jones Industrial Average, which tracks 30 prominent U.S. companies, recorded a 13-day winning streak in July – its longest since 1987. Like the S&P 500, the Dow Jones is also trading less than 5% below its all-time closing high, set back in January 2022.
US Sector Returns (YTD in %)
What is fueling the stock market’s gains?
In one word: expectations. The U.S. economy has defied expectations for a recession, with job growth, consumer spending, and corporate earnings remaining resilient despite higher interest rates. The recent downward trend in inflation data adds to the optimism, with investors hopeful that the Federal Reserve can achieve a soft landing or potentially avoid a recession altogether. Despite the favorable trends in the first half of 2023, there is concern that the Fed may need to keep raising interest rates due to recent home and commodity price increases.
Gasoline Prices Rise to a 3-Month High, Prompting Inflation Concerns
Gasoline prices are rising again, sparking concerns among consumers and central bankers alike. According to AAA, the national average price for a gallon of regular gasoline reached a three-month high of $3.75 on July 31st. The recent rise in oil prices is driving this increase, with West Texas Intermediate crude hitting $80 per barrel. Other contributing factors include supply cuts by OPEC and Russia, extreme heat disruptions at refineries leading to lower gasoline inventories, and overall optimism about the global economy and demand for oil. While current prices are still below the level of $4.22 per gallon one year ago, the rise in fuel costs could slow the Fed's progress in curbing inflation and may even require additional interest rate hikes by the central bank. As the situation unfolds, markets will pay close attention to the energy and overall commodity markets in the upcoming months.
Important Disclosures
This material is provided for general and educational purposes only and is not investment advice. Your investments should correspond to your financial needs, goals, and risk tolerance. Please consult an investment professional before making any investment or financial decisions or purchasing any financial, securities, or investment-related service or product, including any investment product or service described in these materials.
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