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  • Writer's pictureDoug MacGray

Short, Positive Market Week, China Struggles, and OBX

June 24, 2024


AI OPTIMISM CONTINUES TO LEAD THE WAY: The S&P 500 is what is called "cap-weighted." What this means is that the size of the company, the total capitalization of the company, affects its weight, and influence, in the index. Thus, even though there are 500 companies in the S&P 500, if the largest company represents 10% of the total capitalization of all 500 companies, that stock will make up 10% of the index. Because of this, the total capitalization of the largest tech companies have an outsized affect on the total returns of the S&P 500, and other indices. This week, tech stocks struggled while much of the rest of the market rallied on positive economic data. Nvidia had its first negative week since April, but it was not quite enough to drag the S&P 500 into negative territory for the holiday-shortened week. This imbalance in how the S&P 500 and the rest of the U.S. stock market performs will continue as long as AI optimism continues to drive the market and investors expectations of future earnings for those large cap companies.



LONGER-TERM PERFORMANCE:  Below are the annualized three-year and five-year numbers for these same indices.  



U.S. INDUSTRIAL PRODUCTION INCREASED IN MAY: Industrial production measures the combined output of mining, manufacturing, and utilities. Total industrial production rose 0.9% in May. Total industrial production in May was 0.4% higher than a year ago.  



RETAIL SALES UP A BIT IN MAY:  Total U.S. retail sales were up 0.1% in May, and were up 3.0% from a year ago. The rate of growth in retail sales increased sharply after the 2020 shutdowns, and as you can see from the graph below, the rate of growth in retail sales has been slowing. This is essentially what the Fed wants to see without getting into negative territory.



CHINA REAL ESTATE MARKET CONTINUES TO STRUGGLE:  China's housing declines continued to worsen in May. Industrial production registered at 5.6% above one year ago, but that was below expectations. Retail sales are growing, but remains below the 2019 numbers. Real estate continues to be the drag on China's economy. The Chinese bank did not lower interest rates at its most recent meeting. It is likely that the Chinese government will increase spending in the real estate sector to stabilize the housing market and perhaps begin lowering interest rates. 


LACK OF HIGH QUALITY DAY-CARE OPTIONS PRESENT A CHALLENGE TO SMALL BUSINESS:  Currently, 60% of small businesses are hiring. Stonecrop is one example, having hired a few new employees in the past several months. According to a recent survey conducted by Goldman Sachs, 80% of small businesses are struggling to find qualified candidates to fill jobs. 84% of those small businesses say that difficulties in candidates finding affordable, high-quality child care is a major challenge to filling these positions.


CAN'T HELP MYSELF:  As many of you know, I was born and raised in Massachusetts, so the New England sports teams are in my blood. My family vacation (see below) got off to a great start for me with the Boston Celtics winning championship number 18. My three children were all raised in the Philadelphia area, and I encouraged them to support their local teams, and they are all loyal Philadelphia sports fans. That has led to a bit of friendly tension within the family, but it all works (especially when my team wins!).


OBSTRUCTED VIEW:  Over the years, our family has often spent a week in Outer Banks. In fact, we first did it when at least one of our three children was in diapers. We were able to pull it off again this past week with our family that now numbers 12. It was a wonderful time. At one point we were taking the little ones to an ice cream joint that we have patronized many times over the years, and it just so happened that the sun was setting as we got there. My view of the sunset was obstructed, but I kept the obstruction in the shot. 



P.S.:  As I was putting the finishing touches on this email on our last morning in the Outer Banks, all five of the grandkids showed up and surrounded me. So I guess I should show you the latest picture of them.



Have a great week!


Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.



Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax

(610) 628 4545


"You can't get much done in life if you only work on the days that you feel good." Jerry West


"How much better to get wisdom than gold, to get insight rather than silver."  Proverbs 16L16 (NIV)


SOURCES:

U.S. INDUSTRIAL PRODUCTION INCREASED IN MAY: https://www.federalreserve.gov/releases/g17/Current/default.htm

RETAIL SALES UP A BIT IN MAY: https://www.census.gov/retail/sales.html

CHINA REAL ESTATE MARKET CONTINUES TO STRUGGLE: https://gritcap.io/p/warren-buffett-trims-stake


(c) 2024 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved


*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.


Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

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