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

The typical lighter economic calendar following the U.S. employment report
awaits, with second-tier central bank decisions and data. On Sunday OPEC+ meets
and is not expected to make further supply cuts despite the slide in oil prices since
April’s surprise announcement. The Reserve Bank of Australia caught markets off
guard when it raised rates last month, and with their recently mixed data and
China’s tenuous recovery, traders are leaning towards no change at Tuesday’s
meeting, with a 25bps hike fully priced in by August. Meanwhile, the Bank of
Canada paused in April and is expected to hold again, but any deviation could be a
leading indicator for the FOMC the week after. In the U.S., ISM Services PMI is the
only major release scheduled, along with factory orders, May’s trade balance
figures, and consumer credit numbers. Apple’s Worldwide Developers Conference
runs all week, which is worth watching given the Nasdaq-100 Index’s recent ascent.
Europe’s docket is quiet, while China issues inflation and trade updates.   [1]

Recapping Last Week

U.S. equities advanced as investors celebrated the debt ceiling bill’s passage, while
a strong jobs report complicated the Federal Reserve’s signaled policy path. The
Russell 2000 Index jumped 3.3%, while the Nasdaq Composite and S&P500 rose 2%,
with the latter reaching a nine-month high. All 11 S&P500 sectors finished positive,
led by consumer discretionary, real estate, and basic materials. Most commodities
were little changed as the U.S. dollar eased from recent highs. U.S. Treasury yields
fell after several FOMC members, including vice chair nominee Jefferson, suggested
that skipping a rate hike at the June meeting would allow policymakers time to
assess data, without precluding future tightening. However, an exceptionally strong
labor market likely keeps the door open to more rate hikes in June and beyond. Nonfarm payrolls surged by 339K in May, beating expectations for the 14th consecutive month, even as the unemployment rate ticked up to 3.7% from 3.4%. There was good news on the inflation front as average hourly  earnings gains slipped to +4.3% YoY, albeit still well above the 2.8% pre-pandemic average. Private payrolls increased by 278K and job openings in April rose to their highest level since January, which contrasted with May’s dismal consumer confidence reading, where consumers
fretted over job prospects. In other news, U.S. Manufacturing PMI contracted further in May, but respondents expressed indications of expected growth later this year. U.S. housing prices are heating up again despite rising mortgage rates, as low supply sent values higher by 0.4% MoM in March. Internationally, Eurozone inflation fell more than forecast in May, tumbling to +6.1% YoY from +7% the prior month. Consumer prices dropped month-to-month in Germany for the first time this year. In China, a report Friday that regulators are considering new measures to boost the
real estate market fueled speculation of additional economic stimulus. Factory
activity withered more than expected in May and services expansion slowed. Finally,
Australia’s April CPI rose to +6.8% YoY from +6.3%, driven by soaring fuel prices, while Japan’s factory output and retail sales missed the mark in April.  [2]

Chart of the Week:

U.S. equity markets turned sharply into a risk-on scenario this week after the debt
ceiling cloud was lifted, with the Consumer Discretionary Sector Index ($IXY) leading the way. Although discretionary stocks had a great start to the year, February through April saw mostly flat to downward price action. The top study below the chart is a relative strength comparison to the Consumer Staples Sector Index ($IXR), which started to turn higher in early May and then accelerate mid-month. $IXY was starting to emerge from its consolidation zone, but it wasn’t until last week that prices took off, gaining over 5%. The 50-day EMA is sitting only one point below the 200-day, meaning that barring a major correction this week, a golden cross is inevitable. The RSI study is confirming strength and hasn’t yet reached overbought territory above 70. 

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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