Here’s The Asset Guidance Group Outlook for the Week Ahead… 

Central banks headline a busy week, with rate decisions from the Federal Reserve,
European Central Bank, and Bank of Japan. The Fed faces a difficult choice on
Wednesday. The U.S. economy is in good shape by most indications, with
consumer demand keeping core inflation elevated. Many committee members
have been vocally dovish recently, seemingly in favor of skipping a hike given that
the full impact of the past year’s tightening likely hasn’t been realized. The verdict
may rest on Tuesday’s CPI report, where a significant cooling in headline inflation
is expected. However, the decline may be due to base effects, with elevated
readings from 2022 dropping from the calculation. The rest of the U.S. calendar is
loaded, with retail sales, producer prices, Treasury auctions, regional
manufacturing updates, and consumer sentiment. In Europe, rate hikes are priced
in for June and July, but the ECB may keep their options open beyond this month
given the recent economic data. The BOJ meets Thursday and continues to predict
that inflation will fall later this year. Judging by the yen’s YTD performance, markets
are doubtful of any meaningful policy change. Finally, China releases retail sales
and industrial production figures as the economy struggles with weak demand.   [1]

Recapping Last Week

Small caps outperformed in an otherwise muted week for U.S. equity indexes, as
investors awaited the Federal Reserve’s next decision on interest rates. The Russell
2000 Index rose 2% as regional banks recovered, while the Nasdaq Composite and
S&P500 gained less than 0.5%. Nine of 11 S&P500 sectors finished positive, led by
consumer discretionary as Tesla surged 14% after adding General Motors to its EV
charging network. Crude oil prices fell 2% despite Saudi Arabia unexpectedly
announcing an additional production cut of 1M barrels per day. U.S. Treasury yields
rose modestly after central banks in Australia and Canada surprised with 25bps rate
hikes, citing persistent inflation. At week’s end, the chance of a June FOMC rate
increase was below 30% according to fed funds futures, but there is still a CPI release
that could swing the outcome. In economic news, U.S. Services PMI slipped to 50.3
in May, well below forecasts as new orders, employment, and prices all lost
momentum. U.S. manufacturing continued to buckle under the weight of higher
interest rates as factory orders cooled in April. The trade deficit widened in April as
U.S. exports fell by the most in three years, which is likely to be a drag on Q2 GDP
growth. Weekly unemployment claims jumped to 261K, while consumer credit
expanded by 5.7% YoY in April, the fastest pace since November. Internationally,
downward revisions to the past two quarters of GDP growth pushed the Eurozone
into a technical recession. Future expansion prospects were dimmed by weak
industrial production and factory orders in Germany. EU PPI fell for a seventh
straight month on declining energy prices, but food and durable goods remained
high. European Central Bank President Lagarde said it’s too soon to call peak inflation,
likely affirming more rate hikes ahead. In China, the nation’s largest banks cut
interest rates for savers, setting the stage for similar central bank actions. Factory
gate prices fell the most in seven years and consumerprice increases remained tame.
China’s exports plunged 7.5% YoY in May, sparking growth concerns.  [2]

Chart of the Week:

The CBOE Volatility Index (VIX) reflects the expected 30-day volatility of the S&P500 Index. A high VIX implies an elevated degree of market uncertainty. Also referenced as the fear gauge, the highest point over the past five years was 85.47, corresponding to the panic in March 2020. The last three years have featured a well-defined horizontal range, which is more typical than
seeing a long-term trend develop. The upper bound has been close to 35, with the lower bound near 15. Last week VIX broke down under
that floor to its lowest close since before the pandemic started. This could represent a higher degree of investor confidence, which often corroborates with a rising S&P500 environment. 

Click here to view chart. [3]

Sources: [1] [2] [3] tdainstitutional.com tdainstitutional.com; Any performance data reported by Asset Guidance Group, LLC has been grouped and reported by kwanti.com, imported from TDAmeritrade Institutional, Risk categories as scored by Grable-Lytton test and grouped by like risk tolerance levels; NOTE: individual account performance grouped solely by model classification type in terms of risk tolerance. Individual portfolios include equivalent equities exposures via like models, but many may hold additional investments like structured notes, fixed income investments such as CDs, bonds, and other individually preferred securities. 1-Week risk score denotes overall performance of all AGG client portfolios grouped together by like-risk tolerance scores not by identical investment allocations; [4] [5] Macro Monday (tdainstitutional.com);

*All other Asset Guidance Group analysis, www.stockcharts.com; All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat,0020Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet; Chart from Indeed’s Hiring Lab.

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