Asset Management Weekly Market Commentary

Market updates for the week ending July 19, 2024

Key observations

  • U.S. large caps (S&P 500) fell on the week as semiconductor and artificial intelligence (AI)-related names dragged down the information technology sector. Market participation remained encouraging as capital flowing out of information technology names found a home in energy, financial services, industrial, and real estate stocks, among others.
  • Small cap stocks (S&P 600) continued to perform well on an absolute and relative basis over the balance of the week with economically sensitive sectors such as energy and financial services leading the way.
  • Riskier, higher yielding corporate bonds have been beneficiaries of the rally and improved sentiment surrounding smaller capitalization stocks. High yield corporate bonds could offer investors the best of both worlds with the potential to rally alongside small cap stocks should gains be sustained, while also potentially holding up better should small caps or equities broadly sell off.

What we're watching

  • U.S. Purchasing Managers Index (PMI) for July is released Wednesday. The PMI Composite came in at 54.8 in June, with a Manufacturing reading of 51.6 and a Services reading of 55.3. A reading above 50 indicates expansion or growth, below 50, contraction.
  • Preliminary 2nd quarter U.S. GDP is released Thursday with 1.9% quarter over quarter and 2.9% year over year growth expected.
  • June Personal Consumption Expenditure (PCE), the FOMC's preferred inflation gauge, is released Friday. Headline PCE Deflator is expected to rise 2.5% year over year, down from 2.6% year over year the prior month. Core PCE Deflator, which is more closely watched by policymakers, is also expected to rise 2.5% year over year, down modestly from the 2.6% reading in May.