This Week in Review | Q2 Market Recap, June US Jobs, Trade Deal Update

Transcript

Charles Dornbush:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors to stay up to date with our latest market insights. Subscribe to our YouTube channel or visit FisherInvestments.com. Before we dive in, a quick word as we head into the July 4th weekend. This year marks America's 250th anniversary since the signing of the Declaration of Independence, a remarkable milestone worth pausing to appreciate. Wherever you're spending the holiday, we hope it's a safe and restful one. Now let's review what happened this week.

First, a Q2 market recap.

Tuesday marked the end of this year's second quarter. Global stocks faced geopolitical tensions, energy price hikes, rising inflation, and a new Fed Chair. After a near correction in Q1, global stocks rebounded 8.9% in April and another 4.8% in May. Volatility resumed in June, largely driven by a pullback in Tech stocks, although global stocks ended the month around flat Overall, global stocks were up 14.1% in Q2. Energy markets were a big part of the media narrative in the first half of the year. Brent crude rose sharply in Q1 as the conflict in Iran disrupted shipping through the Strait of Hormuz, with oil prices peaking over $110 per barrel in March. Prices remained volatile in April and early May, but have steadily fallen from there, settling around $72 per barrel by the end of June, which is right around pre-conflict levels. Inflation added to the unease, rising to 4.2% year-over-year in May, and some investors continue to fear a repeat of the high inflation we saw back in 2022. Another major area of concern in Q2 was artificial intelligence, or AI, with many fearing accelerating AI infrastructure spending is unjustified given current demand. Remember, though, markets actively price in widely discussed fears, which reduces their ability to surprise stocks and market ups and downs are completely normal in a bull market. Volatility can occur for any reason or no reason at all, even in years where stocks perform well. And history shows the market rewards investors who stay disciplined.

Next, the US jobs report.

Thursday, US labor market data for June were released showing nonfarm payrolls rose by 57,000 and the unemployment rate fell to 4.2%. That marks the fourth straight month of job growth. Job growth came in well below expectations, largely as a result of reduced labor force participation. Fears of AI related layoffs have continued to make headlines lately. Some firms have pointed to AI as the reason for job cuts. Others have likely used AI as cover for business decisions that simply didn't work out. Layoff fears tied to AI are understandable, but it helps to view these announcements through a wider lens. AI advancements will likely create short-term winners and losers, and real people are feeling that disruption today. We don't take that lightly. But innovation isn't a zero-sum game. AI will create jobs and roles we can't even imagine yet, which we believe will outnumber the jobs lost. This has often been the case with innovative technologies throughout history. The labor market will need time to work through this transition, and we believe the long-term outcome for the economy and markets should be a net positive. Layoff announcements grab attention and we empathize with those affected. Yet, June's positive jobs figures suggest the US labor market is in a better place than headlines imply.

Finally, a trade deal update.

Wednesday marked the mandatory six-year joint review of the US-Mexico-Canada Agreement, the free trade deal that replaced the North American Free Trade Agreement in July 2020. It's a 16-year deal currently set to expire in 2036, and this review is its first major checkpoint. Ahead of the deadline, the Trump administration confirmed it would not extend the agreement. This outcome was widely expected and leaves the existing deal intact, but becomes subject to annual reviews over the next decade. The important thing to remember is that trade between these deeply integrated economies isn't going anywhere. The structure of the agreement provides real continuity, no matter which path the three nations choose. This review has been on the calendar for years, and trade policy has dominated the news cycle for a long stretch now. We think that broad attention actually mutes the market impact because surprises are what move stocks most. We believe there's very little surprise left in this particular event. For long-term investors, the lesson here is a familiar one. Headlines about trade reviews and policy shifts can feel urgent in the moment, but the underlying fundamentals supporting this bull market remain intact.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series 3 Things You Need to Know This Week, released every Monday. You can also visit FisherInvestments.com anytime for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit "Like" and "Subscribe."