Weekly Market Watch

Market Outlook

Global equities finished down last week as a hotter-than-anticipated U.S. Consumer Price Index (CPI) reading dimmed hopes of multiple interest rate cuts from the Federal Reserve (Fed) this year. Both the “supercore” CPI (which excludes food, energy and housing) and the trimmed-mean CPI accelerated on a year-over-year basis, marking the first time the trimmed-mean CPI increased since 2022. Volatility resumed on Friday over concerns about a broader conflict in the Middle East. Consequently, in a flight to safety, the 10-year U.S. Treasury yield experienced its largest daily decrease since the end of January.

The culmination of macro events led the U.S. dollar to the highest level since November, and the MSCI World ex USA Index fell below its 50-day moving average for the first time since November as well. Earnings season kicked off last week, led by several of the largest firms in the Financial sector. While results largely beat consensus expectations, guidance on metrics such as net interest income, disappointed investors.

Chart of the Week

After Wednesday’s CPI upside surprise, investor expectations for multiple rate cuts rapidly changed. Consensus now expects two cuts, versus three at the start of last week.

We maintain that the Fed will be challenged to bring inflation down to its 2% target as personal consumption remains robust.

As interest rates stay higher for longer, we continue to emphasize quality allocations in portfolios.

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