Weekly Macro Minute

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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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This information is prepared by GuideStone Capital Management, LLC®, a controlled affiliate of GuideStone Financial Resources®. This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Diversification is not a guarantee against loss. This information does not represent any GuideStone® product. Special risks are inherent in international investing, including those related to currency fluctuations and foreign, political and economic events.

The material represented has been obtained from sources we consider reliable, but which we cannot guarantee. It is subject to change without notice and is not intended to influence your investment decisions. This information discusses general market activity, industry or sector trends or other broad-based economic, market or political conditions and should not be construed as research or investment advice.

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The S&P 500® Index is a market capitalization-weighted equity index composed of approximately 500 U.S. companies representing all major industries. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of its constituents. “Standard & Poor’s®”, “S&P 500®”, “Standard & Poor’s 500” and “500” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by GuideStone.

The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index, representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The index is completely reconstituted annually to ensure that larger stocks do not distort the performance and characteristics of the actual small-cap opportunity set. Frank Russell Company ("Russell") is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. "Russell®" is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings and/or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication. Index used with permission. It is not possible to invest directly in an index.