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TheBRRR’s Thoughts

Markets were closed today for Juneteenth.

We expect muted volatility through the July 4th holiday as we enter the doldrums of summer, but fireworks are inevitable in the final ramp up to the US Presidential election.

Let’s poll the audience (just tap on the winner’s name).

We’re covering big tech’s recent surge and commentary about Jay Powell’s conundrum balancing the growth of the economy, the jobs market and price inflation.

Nasdaq Continues Torrid Pace Amidst NVDA Repricing

WHAT HAPPENED

• Tech Stocks Surge: Despite US markets being closed for Juneteenth, Nasdaq 100 futures gained 0.2%, marking an 8-day winning streak.

• Nvidia's Ascendancy: Nvidia became the world’s most valuable company, surging 174% YTD, contributing a third of S&P 500’s 2024 gains.

• Tech Giants' Dominance: Nvidia, Microsoft, Meta, and Apple account for half of the S&P 500’s 15% YTD advance.

• Fed Patience on Rate Cuts: Fed officials emphasize patience, suggesting rate cuts could take "quarters."

• European Market Movements: Stoxx 600 dipped 0.1%, with French stocks lagging. Political risks continue to weigh on French assets.

WHY IT MATTERS

• Tech Bubble Concerns: The relentless tech rally raises questions about market stability and overvaluation risks, with tech giants nearing a $10 trillion valuation.

• Economic Indicators: Slowing consumer inflation and potential rate cuts drive tech stock momentum, but Fed caution suggests uncertainty ahead.

• Global Market Reactions: European markets seek direction amidst US tech gains, with specific stocks like Games Workshop and SMA Solar experiencing significant moves.

• Monetary Policy Impact: Mixed signals from inflation data and Fed statements influence bond markets, with implications for future interest rates and economic growth.

• Political and Economic Uncertainties: Ongoing political risks in France and economic data from the UK affect investor sentiment and market dynamics globally.

Key Data Points

• Nasdaq 100 Futures: +0.2% as of 8:00 AM.

• Nvidia YTD Gain: 174%, now world's most valuable company.

• S&P 500 Contribution: Nvidia, Microsoft, Meta, and Apple = 50% of 15% YTD gain.

• European Stoxx 600: -0.1%, French CAC 40: -0.4%.

Investor Takeaway

• Focus on Earnings Growth: Large-cap tech offers strong earnings growth and margin defense, making it a favored sector amid economic slowdown.

• Caution in European Markets: Political risks and mixed economic signals necessitate careful selection in European investments.

• Watch for Rate Cut Signals: Stay alert to Fed communications and inflation data for clues on future rate cuts and economic policy shifts.

ZeroHedge

Why The Fed Might Need to ‘Get On With It” and Cut Rates

Summary

The Federal Reserve is under pressure to cut rates sooner rather than later due to slowing consumer spending, a cooling labor market, and easing inflation. Economists warn that delaying rate cuts could push the economy toward recession, stressing the importance of balancing inflation control with employment protection. Despite current strong stock market performance, the broader economic risks and potential impacts on vulnerable demographics are key concerns.

WHAT HAPPENED:

• Consumer Spending: May retail sales data shows a cooling pace from last year.

• Labor Market: Unemployment at 4%, the highest since January 2022, despite better-than-expected job additions.

• Inflation: May’s CPI increased at its slowest pace since July 2022. The PCE index likely rose at its slowest pace of the year.

WHY IT MATTERS:

• Economic Indicators: Citi's Economic Surprise Index is near its lowest in over a year.

• Labor Market Concerns: Economists, including Neil Dutta from Renaissance Macro, warn that further labor market weakening could lead to recession, not just rebalancing.

• Inflation Control vs. Employment: The Fed’s dual mandate (price stability and maximum employment) faces pressure. As core inflation momentum softens, the focus shifts to protecting employment.

• Market Reactions: Stocks, particularly tech, are performing well. However, concerns persist about the Fed’s impact on fundamental economic activity.

KEY POINTS:

• Beveridge Curve: Indicates potential increased unemployment if job openings decline further.

• Broader Impact: Allianz’s Mohamed El-Erian warns of the risk of the Fed acting too late, potentially exacerbating economic slowdown and harming small businesses and lower-income households.

Yahoo Finance

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The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.ll