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The summer months are usually relatively benign for markets as investors opt for shoals rather than bar charts, but that won't happen this year.
The US stock market is contracting and investors are withdrawing their money at a near-record pace as storm clouds gather over the US economy.
That means Wall Street titans may have to deal with rough waters as they navigate their Nantucket getaways this year.
What's happening: โSell โโand leaveโ is a popular Wall Street style that describes the tendency of investors to close their deals and organize their portfolios before the holidays. It also alludes to the historic underperformance of stocks during the summer months.
But recent trade flows show something bigger is at stake this year.
Analysts at Bank of America said Tuesday that their clients have been big net sellers of U.S. stocks for five weeks in a row. Just last week, they sold $5.7 billion more in stock than they bought, the biggest outflow since last July.
Bank of America last week recorded the second-largest selloff in technology stocks in its history. And while one week does not constitute a trend, it does contrast sharply with the Magnificent seven fervor that caught Wall Street Just a few months ago.
Low volumes, choppy markets: The tides seem to have turned and the usual summer doldrums are nowhere to be found.
โSummer 2024 may prove volatile, with momentum stalled amid political uncertainty,โ wrote Lisa Shatlett, chief investment officer at Morgan Stanley Wealth Management, in a note this week.
โThe economic crosscurrents have left the [Federal Reserve] "We are being more hesitant about rate cuts, amplifying the potential importance of each piece of information as the debate continues over how tight the policy is," he said.
A series of weak Treasury auctions It could also roil markets, not to mention the ongoing and hotly contested upcoming presidential election. Market volatility in an election year tends to increase in October, but low trading volume and potential big catalysts could mean big swings in the coming weeks.
We've already seen whiplash-inducing moves in the Dow Jones. during the last two weeks as traders reacted to unexpected economic data.
A shrinking market: The stock market is not the economy (for the most part). And its influence on the macroeconomic environment has been fading for some time.
At its peak in 1996, there were 7,300 publicly traded companies in the United States. Today there are around 4,300.
Nearly 90% of all companies with revenues over $100 million are now private, said Torsten Slok, chief economist at Apollo Global Management. Privately held companies also account for nearly 80% of all job openings in the United States.
โBottom line: Public markets are a small part of the overall economy,โ he said.
Putting it all together: A shrinking market and investor retreat indicate that risk appetite in the United States is fading rapidly.
Fear is currently driving the US market, According to CNN's Fear and Greed Index.
Years of high interest rates and inflation, a chaotic political and geopolitical environment, and general economic uncertainty may be holding back both executives and shareholders.
Meaning: This is worrying, according to JPMorgan CEO Jamie Dimon.
"The total [of public companies] It should have grown dramatically, not shrunk,โ Dimon wrote. in its annual letter to shareholders earlier this spring.
Meanwhile, the number of private companies in the United States backed by private equity firms has increased from 1,900 to 11,200 over the past two decades, according to JPMorgan data.
Dimon's company, of course, makes a huge amount of money taking companies public, so he's not exactly an impartial observer. But Dimon said his concerns are broader than JPMorgan's bottom line: If this trend continues, our understanding of the U.S. economy could become more confusing, he argued.
"This trend is serious," Dimon warned Monday. "We really need to consider: Is this the outcome we want?"
CEOs earn almost 200 times more than workers
CEOs earned big pay packages last year as the U.S. stock market boomed. reports my colleague Matt Egan.
The bosses have always made more money than the workers. But the gap between CEOs and employees is growing.
The Average S&P 500 CEO they paid him 196 times as much as the average employee in 2023, according to an analysis by Equilar and The Associated Press.
That's up from a ratio of 185 in 2022.
The widening gap is due to the fact that CEO pay, which is closely tied to stock prices, is rising noticeably faster than that of employees. In fact, many workers are struggling to keep up with the cost of living.
Only the jump in 2023 was significant. Median total compensation for S&P 500 CEOs (including stock awards) soared to $16.3 million in 2023, a whopping 12.6% year-over-year increase, compared to just 0.9% in 2022.
Workers also earned more money. But at a much slower pace.
The average S&P 500 employee earned $81,467 last year, up 5.2% from 2022, according to the report.
To put it another way: the annual wage increase amounted to about $4,300 for workers. For CEOs, it was an additional $1.5 million.
Job postings fall to new 3-year low as US economy continues to slow
The number of job openings in the US fell for the second month in a row, setting a new three-year low amid More signs of cooling in the labor marketinform me colleague Alicia Wallace.
There were 8.06 million available jobs posted in April, according to the Bureau of Labor Statistics' latest Job Openings and Labor Turnover Survey (JOLTS) released Tuesday. That's down from the downwardly revised 8.36 million seen a month earlier and the lowest since February 2021.
Economists expected job openings to total 8.36 million, according to FactSet estimates.
In April, it was estimated that there were 1.2 jobs available for every job seeker. That's the lowest ratio since June 2021, BLS data shows.
A slowdown in job growth could bring the labor market closer to pre-pandemic levels, but it could also mean a slowdown in the overall economy. The Federal Reserve, in its battle against high inflation, wants demand to slow and price increases to slow even further. before reducing rates.
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