Market Report Jul 16 2023

Inflation has been a focal point for investors in recent times, and it seems that the Federal Reserve is beginning to see the fruits of their efforts towards mitigating it. Inflation, known to negatively affect equities and bonds while eroding wealth, is now showing signs of being managed effectively, as indicated by recent Consumer Price Index (CPI) data. This week, the markets will also focus on retail sales and housing reports, although these are expected to cause less concern.

We are also in the middle of the earnings season, and recent results from Citigroup showed disappointing figures for Q2. Interestingly, the market had seemingly already priced in this scenario as the stock remained in a period of consolidation. In contrast, Tesla is attracting attention due to an unusual upgrade in price target by Citigroup, which was met almost immediately. Despite the peculiarity of this late upgrade, Tesla's bullish momentum has been consistent throughout the year.

In another significant development, the NASDAQ 100 is set to conduct a rare rebalance, a process that has occurred only twice previously in 1998 and 2011. This rebalance will address the issue of some companies exceeding the allocation guidelines for the index, a situation that can increase risk if these companies' stocks were to decline. Several of the companies subject to this rebalance include Apple, Microsoft, Google, Nvidia, and Tesla. The impact of this rebalance on these stocks remains uncertain, and investors are cautioned to monitor this closely.

Anne Chapman

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