Our Top Market Takeaways for July 28, 2023

Market update: Team Barbie or Team Oppenheimer?

The great Barbenheimer debate is rife, and the economy and markets are weighing in. Today, we explore this week’s news flow and offer our thoughts on which side it takes.

1. On the Fed: Despite hiking to levels unseen in 22 years, stocks are having a party in Barbieland.

After over a year of tightening and a “skip” in June, the Fed may be drawing the curtain on its rate hikes. On Wednesday, the Fed hiked 25 basis points to a target policy rate of 5.25–5.5%. 

The Fed isn’t taking a victory lap on its fight against inflation just yet, but with a lot of progress so far (at the same time the economy has stayed on solid footing), we think it’s probably the last hike of the cycle (or close to it). It could also be the start of the end of an era – the European Central Bank signaled it could be wrapping up hikes this week, and the Bank of Japan surprised by widening its yield curve control policy overnight.

Whether the Fed ultimately gets a reputation for achieving a soft landing or spurring a mild recession, stocks have moved on from the debate. After a rough 2022 as the Fed got going, the S&P 500 is now up some 20% this year and is less than 5% off of last January’s record highs. It’s also likely not a huge coincidence that the market bottomed around the same time the Fed delivered its final monster 75-basis-point hike (marking a slower pace from there).

All market data from FactSet and Bloomberg Finance L.P., 7/28/23.

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IMPORTANT INFORMATION

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Bonds are subject to interest rate risk, credit and default risk of the issuer. Bond prices generally fall when interest rates rise.​ Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment and reinvestment risk. Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss. ​