Nasdaq unbeatableCurrent Market Data and Seasonality
Nasdaq closed last week at new highs, indicating strong upward momentum. In terms of macroeconomic data, June's ISM Services PMI fell to 48.8 (previously 53.8), below the consensus of 52.5. This signals a weakening in the services sector, which might impact investor sentiment in the short term.
On the other hand, the Non-Farm Payrolls (NFP) data for June came in at 206,000, exceeding the consensus of 190,000 but below the previous reading of 218,000. Despite this, the data positively influenced the market as it brought the prospect of an interest rate cut by the Fed closer. Private sector employment stood at 136,000, below expectations of 160,000, which was interpreted as a sign that the Fed might be more inclined to ease monetary policy.
Seasonal Prospects
We are currently in a seasonally favorable period for the market, which could last until mid-July. Historical data indicate the potential for further gains, supported by seasonal analysis and technical signals.
Risk Pricing and Sentiment
The market currently prices in a 72% chance of the first rate cut in September. Additionally, 72% of retail investors hold short positions, which, from a contrarian perspective, is positive for further gains as potential short covering could drive stock prices higher.
S&P 500 Returns After 20 or More All-Time Highs at Midpoint of the Year
The table shows that the S&P 500 market typically performs well after achieving numerous all-time highs by mid-year. Historically, these years end with positive returns for the full year.
S&P 500 Returns After >10% YTD at Midpoint of the Year
The data indicates that years with over 10% YTD returns by mid-year often continue positive trends throughout the rest of the year, resulting in significant gains by year-end.
Nonfarm Payrolls and Job Market Data
Nonfarm payrolls increased by 206,000, although revisions for previous months lowered these figures by 111,000. Despite this, the unemployment rate remains low, indicating a strong job market.
AAII Member Sentiment on Stock Market Direction
A significant portion of AAII members are bullish about the market direction over the next 6 months, with bullish sentiment higher than historical averages.
Most Anticipated Earnings Releases for the Week Beginning July 08, 2024
In the upcoming week, earnings reports from several significant companies, such as PepsiCo, Delta, and JPMorgan Chase, are expected, which may significantly impact market sentiment.
S&P 500 Earnings Growth for Calendar Year 2025
Projections indicate the highest earnings growth in the information technology and healthcare sectors, with more moderate growth in other sectors such as real estate and consumer staples.
Growth in Disposable Income and Compensation vs. Inflation
The growth in disposable income and compensation exceeds inflation, indicating increased purchasing power for consumers.
Consumer Spending Trends
Consumer spending is rising steadily and remains above trend despite economic fluctuations.
S&P 500 vs. Rising 10-Year Treasury Yield Strategy
The current situation indicates stability in the bond market and continued growth in the S&P 500 index. The lack of a signal to switch to cash suggests that the stock market is in good condition, allowing investors to benefit from the rising market while monitoring bond yields for future warning signals.
Key Economic Events in the Coming Week
Next week, several key economic events are expected, which could influence the markets:
Current market conditions suggest further potential gains for Nasdaq. Despite some concerns about the labor market, overall sentiment, seasonal support, and technical indicators point to a continuation of the upward trend. It will be essential to monitor further macroeconomic data and Fed decisions, which will be crucial for future market movements.
