Weekly Macro Minute

GuideStone Reflections

Jesus answered them, “My teaching isn’t mine but is from the one who sent me. If anyone wants to do his will, he will know whether the teaching is from God or whether I am speaking on my own.”
John 7:16-17 (CSB)

Jesus knew there was a lot of speculation about him, and most of it was missing the mark. The critics’ problem, he noted, was not due to a lack of information. After all, he had been open about his identity and mission and had given them everything they needed to understand. Their problem was an issue of the heart. If they had desired to truly follow and obey God, then they would have been able to understand Jesus’ words fully. Because they didn’t have the right desire, they didn’t have the right understanding.

We all want to live well, discerning right paths from wrong paths. However, developing the capacity for right judgment does not begin with accumulating knowledge through books and studies (although these are good and valuable tools). It starts with ensuring that our hearts beat with the Lord’s and that we want his will to be done above all.

Right judgment begins with the right desire.

Across the Markets

Large-cap U.S. equity indexes continued their upward momentum, with the S&P 500® Index gaining 1.6% for the week, fueled by softer inflation data and ongoing enthusiasm surrounding artificial intelligence. However, market breadth remained narrow, as the equal-weighted version of the S&P 500® fell by 0.6%. Small-cap equities continued to struggle, with the Russell 2000 Index declining by 1.0% for the week and returning -0.4% year-to-date compared to the 14.6% total return of the S&P 500® Index.

U.S. Treasuries experienced a significant rally across the curve as lower inflation and signs of slower economic growth drove yields lower. The 2-year Treasury fell 19 basis points for the week, closing at 4.69%, while the 10-year Treasury yield dropped 22 basis points to 4.21%, well below the year-to-date high of 4.70% on April 25.

The price of U.S. crude oil rose over $3 per barrel to $78.61 for the week, rebounding from the prior week's decline, as analysts expect summer fuel demand to reduce inventories over the next several weeks.

Political uncertainty had a pronounced impact on European markets last week. The market unease followed a significant surge in support for right-wing and far-right parties during the European Union elections. Adding to this uncertainty, French President Emmanuel Macron surprisingly announced snap legislative elections scheduled for later in June, further contributing to the market’s unease.

The Bank of Japan (BoJ) decided to leave its current monetary policy unchanged but announced plans to scale back its purchases of Japanese Government Bonds. A detailed tapering plan for these purchases over the next one to two years is expected to be disclosed at the July meeting. The BoJ’s stance was interpreted as dovish, indicating a commitment to gradually normalize monetary policy rather than an immediate shift.

In the Economy

In May, the headline Consumer Price Index (CPI) came in below expectations and was unchanged month-over-month and rose 3.3% year-over-year. Falling energy prices, particularly gas, contributed to the lower headline CPI. Core CPI, which excludes food and energy, climbed less than expected, rising 0.2% month-over-month and 3.4% year-over-year, marking the lowest level in three years.

As expected, the Federal Open Market Committee (FOMC) unanimously decided to maintain the federal funds rate range of 5.25% and 5.5%. Their updated projections now suggest one rate cut in 2024, down from three, and four rate cuts in 2025, up from three. In the post-meeting press conference, Fed Chairman Powell noted, “We’ll need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%.”

The June preliminary University of Michigan U.S. consumer sentiment survey unexpectedly dropped 3.5 points to 65.6, contrary to the consensus estimate for an increase, as consumers have started to express greater concern about their financial situations.

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