I. Sentiment
The S&P 500 first rose above 7,500 on May 14. It has continued to fluctuate around there since then. This may be a sign that investors are a bit fatigued from all the commotion about the Strait of Hormuz, AI, earnings, Warsh, the Magnificent-7, semiconductors, FOMO, and FEMO so far this year. The market might continue to fluctuate around 7,500 over the rest of the summer as more market participants head off to the beach for a rest.
The bull-bear ratios we track show that sentiment is neither too bullish (which would be bearish) nor too bearish (which would be bullish) (chart). Ho-hum.
By the way, the 10-year Treasury bond yield has been range-bound since mid-2023 between roughly 4.00% and 5.00%, as we've been projecting (chart). For now, we expect more of the same through next year.
II. The Fed
Back in May, we anticipated that the FOMC would pivot from April's easing bias to a tightening bias at the June meeting of the Fed's policy-setting committee. Sure enough, June's Dot Plot reflected that shift, with the median participant projecting no federal funds rate (FFR) cuts this year and nine officials penciling in one or two hikes (chart). Even Fed Chair Kevin Warsh was hawkish at his press conference after the latest meeting, though he chose to be dotless.
The June FOMC meeting minutes, released yesterday, underscore just how hawkish that meeting was, and the recent economic data confirm that the Fed has no reason to remove its tightening bias.
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