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“Invest for the long haul. Don't get too greedy and don't get too scared.” ~ Shelby M.C. Davis.

Good evening:

Equity markets snapped their winning streak on this shortened post-holiday trading week as investors reacted nervously to Jerome Powell’s comments during the Fed Chair’s semi-annual appearance before Congress, as well as to a higher-than-expected rate hike across the pond by the Bank of England. 

Our Head of Research, Tom Lee, did not share their worries. His long-term outlook for the year remained unchanged, as he viewed Powell’s remarks in a positive light. At our weekly huddle, Lee observed that Powell’s remarks, if delivered one month forward after July CPI numbers had been released, “would sound a lot like a victory lap.”

Lee explained his reasoning: “Powell said that while there's been some progress for inflation, he cited the numbers at 4% headline, far from our 2% target.” But as he has previously noted, the 41-year-high CPI reading from back in June 2022 (+1.2% MoM) is likely to result in a significant drop in June 2023 CPI YoY next month, which could fall to as low as 3.0% vs. May 2023 4.1% YoY.