The U.S. economy continues to forge ahead in the face of +5% interest rates set by the Federal Reserve. In the past few weeks, we've seen an upward revision to first quarter GDP From 1.3% to 2%, driven by consumer spending, and multiple employment reports that show the labor market remains healthy despite early signs of potential weakness. (Source: CNBC)
The Fed's preferred measure of inflation, PCE, continues to moderate while still nearly double the Fed's 2% target, coming in at 3.8% for May. The Fed's continued emphasis on reining in inflation, combined with a stronger-than-expected economy, has increased the probability of another 0.25% July interest rate hike to 93% at the time of writing. (Source: The Wall Street Journal, CME FedWatch tool)
The strong economic data and further expected rate hikes from the Fed have not been kind to the bond market, whose prices move inversely to interest rates. The benchmark 10-year U.S. Treasury yield ended the week over 4% for the first time since early March. The yield curve remains inverted, with 6-month Treasuries offering the highest yield along the curve at 5.48%. (Source: The Wall Street Journal)
This week is light with economic data, focusing on inflation with June's Consumer Price Index (CPI) report on Wednesday and wholesale inflation on Thursday with the Producer Price Index (PPI) report.
CHINA SPUTTERS, JAPAN SURGES - The China comeback story from Covid-19 lockdown restrictions has yet to materialize, as the Hong Kong Seng Index is down over 6% in 2023. Instead, investors have shifted their focus to China's neighbor Japan, up more than 23% year-to-date after experiencing more than $33 billion in foreign asset inflows. (Source: The Wall Street Journal)
HOUSING MARKET - With average 30-year mortgage rates back over 7%, many investors predicted a housing market correction that has yet to materialize with national home prices down less than 2% off their all-time highs. The reason? Low housing supply caused by existing homeowners with favorable interest rates; 62% of homeowners have mortgages below 4% and are now reluctant to sell. (Source: FHFA)
THE NEXT BABE RUTH - Shohei Ohtani can do it all on the baseball field and is on pace for another historic season for the two-way star. At the all-star break, Ohtani leads the league in home runs and OPS at the plate, while on the pitching mound is fourth in strikeouts (132 in 100 innings pitched) and the lowest batting average against (0.189) in the entire league. (Source: MLB.com)
JULY 4TH STATS - This year's July 4th celebration marks America's 248th birthday and it is big business across the country; American's spend $9.5 billion on July 4th food, $3 billion on alcoholic beverages, and $2.7 billion on fireworks. In fact, July 4th is the top selling beer-drinking holiday in the U.S. (Source: WalletHub)
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