S&P 500 Climbs to Record on Falling Oil Prices, Easing Trade Tensions

S&P 500 Climbs to Record on Falling Oil Prices, Easing Trade Tensions

The S&P 500 hit a record high on Friday, matching a level it last reached four months ago. The tech-heavy Nasdaq also entered all-time high territory, surpassing its previous peak from December. This past week’s rally was supported by easing trade tensions, along with falling Treasury yields and declining oil prices. Global equities, as measured by the MSCI All Country World Index, rose 3.31% for the week. U.S. equities, as measured by the S&P 500, outperformed with a gain of 3.45%. As markets head into the final day of June and the second quarter, they carry strong momentum, having gained more than 20% since the post–Liberation Day selloff.

U.S. Economy

As noted above, investors and markets had plenty to digest last week. On the trade front, the Trump administration provided updates on ongoing negotiations with both China and the European Union. It also announced the termination of talks with Canada regarding a dispute over dairy product tariffs. In other developments, U.S. government bond yields fell for a third consecutive week. The 10-year Treasury yield dropped to 4.28% by Friday afternoon, down from a recent peak of 4.60% in May. Meanwhile, U.S. crude oil prices declined more than 10% for the week, as easing tensions in the Middle East helped reduce concerns about potential supply disruptions.

Personal Consumption Expenditures (PCE) Price Index

According to Friday’s release of the Personal Consumption Expenditures (PCE) Price Index, inflation moved further above the Federal Reserve’s 2.0% long-term target. Core PCE inflation—which excludes food and energy—rose at an annual rate of 2.7% in May, exceeding both economists’ expectations and April’s 2.5% reading. On a month-over-month basis, prices increased 0.2%, also above the forecast of a 0.1% gain.

Looking Ahead

In the holiday-shortened week ahead, a monthly labor market report due Thursday—just before markets close for the Independence Day holiday—will reveal whether the recent trend of moderate but better-than-expected job growth extended into June. In May, the economy added 139,000 jobs, surpassing consensus expectations of around 130,000. However, downward revisions to job gains in the prior two months tempered the strength of the overall trend.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.