Commentary: Equity rally continues
Last week, the series of favorable macroeconomic events and data releases helped global equity markets deliver positive returns. S&P 500 gained the ground for the fifth consecutive week, while almost every other global benchmark increased as well. Notably, large-caps have started to outperform again, with S&P 500 equal weight gaining 2.5% w/w, while Russell 2000 (small-cap benchmark) and S&P mid-cap 400 rose 0.5% w/w and 1.5% w/w, respectively.
The major catalysts for last week’s rally came from the US. Firstly, the headline inflation dropped from 4.9% to 4.0% y/y in May, reaching the lowest level since March 2021. The Producer Price Index (PPI), also came in below expectations, showing -0.3% decline m/m. Secondly, the May retail sales surprised on the upside, showing a 0.3% m/m increase vs forecasted -0.1% contraction.
Lastly, as widely anticipated, the US Federal Reserve kept the base rate unchanged on June FOMC meeting. Importantly, this move is more likely a skip than a long-lasting pause, as the Fed rate projections hint on two more 25bps hikes in 2023. On the flipside, however, Fed Chair Powell’s post-meeting speech provided dovish signals, as he reiterated his stance that future policymaking will fully depend on the incoming inflation and activity data.
