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AI and uneven market returns.

There is no denying that the S&P 500 and Nasdaq have marched higher in the first half of the year. The numbers might be a bit misleading when it comes to investors’ actual experiences however, as there are a very small batch of companies that are dragging the market higher. As reported in The Wall Street Journal, “The S&P 500, which is up 9.5% in 2023, would be down for the year without the contribution of the eight largest tech stocks. The tech-heavy Nasdaq Composite has advanced 24%, its best start to a year since 1991, according to Dow Jones Market Data.”

There is no doubt that the artificial intelligence (AI) surge is going to prove revolutionary in terms of increasing productivity and reshaping the way companies and individuals do business and live their lives. This industry is going to develop in line with the launch and adoption of smartphones. Yes, it is that big of a deal. It is also the main reason the S&P 500 and the Nasdaq are in the green so far in 2023.

Debt ceiling.

It appears that an agreement is in the works to avoid the debt ceiling crisis that has been percolating for the past couple of months. It seems both sides of the aisle are somewhat less than enthused as to the resulting deal, which likely means both Republicans and Democrats had to compromise – a novel experience in today’s political environment. 

The markets have largely ignored the potential for default, which is a big departure from the last two times the debt ceiling was in contention.

Consumer spending and inflation update.

A slowdown of the U.S. economy has not yet materialized, as the strong labor market keeps driving Americans to spend. Consumer spending gathered steam over the month of April while inflation numbers remained elevated.

The data paints an economic backdrop of a resilient consumer, strong labor market and continued economic strength. This combination may lead to additional rate hikes at the next Fed meeting.