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Is Inflation Whipped?
After a red-hot June built on expectations that the Federal Reserve may succeed at killing inflation without killing the economy, July saw investors begin to question the soft-landing narrative. While the June jobs report aligned with expectations, the unemployment rate unexpectedly ticked to 4.1%, the highest since October 2021.
On the inflation front, the June Consumer Price Index (CPI) report showed a 0.1% decline in prices from May, the first decline in more than four years, bringing the 12-month inflation rate down to its lowest level in more than three years. The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures Prices Index (PCE), also validated perceptions that the Federal Reserve is winning the war on inflation, with the 12-month price increase coming in at 2.5% and approaching the Federal Reserve’s target of 2.0%.
Bond investors welcomed the news, driving the yield on the 10-year U.S. Treasury down from 4.3% at the start of June to 4.0% by the end of the month (bond prices move inversely to yields). On the equity side, concerns about a slowing economy drove investors to sell off mega-cap technology stocks, driving the market for 2024.
The weakness in technology stocks drove the Core Large Cap Equity category to a -0.7% loss in July. Meanwhile, the Core Fixed Income category gained 2.4% as declining interest rates pushed bond prices. (continued on the following page)
For the Nasdaq Dorsey Wright Explore portion of HANDLS Indexes, interest-rate-sensitive categories were the big beneficiaries of the decline in interest rates. REITS and Utilities saw gains of 7.1% and 6.8%, respectively, for the month of July. At the other end of the spectrum, MLPs were the worst performer, gaining 0.2% for the month. Nevertheless, MLPs remain the best-performing category in 2024, with a year-to-date gain of 17.7%.
HANDLS indexes delivered positive returns across the board in July:
- Nasdaq 5HANDL™ Index: 2.1%
- Nasdaq 7HANDL™ Index: 2.6% (1.3x leveraged)
- Nasdaq 10HANDL™ Index: 3.7% (2.0x leveraged)
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