Market Commentary
Brian Stutland

What You Need to Know Before the Opening Bell – June 5th, 2023

Introduction:

As we approach the opening bell on June 5th, 2023, there are several important factors to consider regarding the current state of the market. The incredible jobs data from last week has led to speculation about whether we are closing in on bull market territory. However, despite the confusion among market participants, it’s crucial to approach the situation with caution and keep in mind that the possibility of a recession still looms. In this blog, we will delve into the recent market trends, the strength of the economy, and the potential risks that lie ahead.

  1. Impressive Jobs Data:

Last week, we witnessed remarkable jobs data, including higher revisions, suggesting a stronger employment market than previously anticipated. These positive figures have contributed to the overall optimism in the market and have generated excitement among investors. The robust job market indicates a healthy economy and could potentially fuel further market growth.

  1. Bull Market Territory:

To qualify as a bull market, the S&P 500 would need to rally by at least 20% from its lowest point. With the index hovering around the 4300 mark, we are on the cusp of achieving that milestone. The concentration of gains in a select few stocks, driven by artificial intelligence algorithms, has been a characteristic of the current market environment. Although this trend raises concerns about market breadth and sustainability, the potential for a bull market remains a possibility.

  1. Economy’s Resilience:

Despite earlier predictions of a weaker economy, the actual data portrays a different picture. The economy has proven to be more resilient than expected, driven by factors such as technological advancements and evolving market dynamics. While there may be potential headwinds on the horizon, the current strength of the economy suggests that a recession might not be imminent.

  1. Fed’s Influence:

In the midst of economic recovery, the Federal Reserve plays a crucial role in maintaining stability and managing potential risks. Historically, the economy tends to stay hot as the Fed increases interest rates before eventually cooling off once they tighten monetary policy. It is important to recognize this pattern, as it highlights the possibility of a forthcoming recession. However, it’s worth noting that a recession typically occurs after the yield curve un-inverts, which has not happened yet.

  1. Jobs Market Strength:

One of the primary indicators of an impending recession is a weak job market. However, the current data indicates the opposite. With consistently strong jobs numbers and positive revisions, there is no evidence of a weakening labor market. This further strengthens the argument against an immediate recessionary scenario.

Conclusion:

As we prepare for the opening bell on June 5th, 2023, it is important to acknowledge the encouraging jobs data and the potential for the market to enter bull market territory. However, caution should prevail as we consider the broader economic landscape. While the current economy shows resilience, the possibility of a recession still exists, as the Federal Reserve tightens its policy and the yield curve un-inverts. It is vital for investors and market participants to remain vigilant, closely monitor market trends, and adapt their strategies accordingly.

 

Here is what else you need to know today

Oil Rises on Saudi Arabia’s Go-It-Alone July Production Cuts

  • Saudi Arabia has announced that it will cut oil production by 1 million barrels per day in July, despite an agreement with OPEC and other major producers to keep output steady.
  • The move is a sign that Saudi Arabia is willing to take unilateral action to support oil prices, which have been under pressure from rising US shale production.
  • The price of Brent crude oil rose by more than 2% in early trading on the news.

Big US Banks Face 20% Jump in Capital Requirements, WSJ Says

  • The Wall Street Journal reports that the US government is planning to increase capital requirements for big US banks by 20%.
  • The move is part of an effort to make the banks more resilient to financial shocks.
  • The new requirements would take effect in 2024.

Biden Debt-Bill Signing Set to Unleash Tsunami of US Debt Sales

  • President Biden is set to sign a bill that will increase the US debt ceiling by $480 billion.
  • The move will allow the government to continue borrowing money to finance its operations.
  • However, it will also lead to a tsunami of US debt sales, which could weigh on the stock market and raise interest rates.