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 Dow Jones Transportation Average (DTX.I) & SPDR Portfolio Developed World Ex-US ETF (SPDW)

The market advance which started back in March has continued to gain traction in the last week, with market breadth continuing to expand. Country indices in North America and around the world both in developed and emerging markets continued to advance.

In North America, all eleven major industry groups posted positive performance, and leadership continued to widen out from Technology to include Industrials, Consumer Discretionary and Communications Services. Subgroup action also highlights increasing breadth with a wide variety of groups starting to move up including steelmakers, consumer services, forest products, social media, retailers, energy and video games.

Yesterday’s trading action was particularly significant as US equities showed resilience in the face of a more hawkish than expected Fed. The FOMC delivered what could be considered a “hawkish hold” pausing interest rate hikes as expected but signaling through the Fed Funds Dot Plot survey that the bulk of Fed members now expect to see potentially two more rate hikes this year. The Fed raised its Core PCE inflation forecast, indicating inflation in wages and services is not coming down as fast as previously hoped. It also raised its GDP forecast and lowered its unemployment rate forecast for this year, indicating signs that the economy has remained robust through the recent wave of monetary tightening, which may be read by some investors as a bullish sign.

The wider investment community also took the Fed news in stride as the US Dollar and the 10-year treasury note yield slipped slightly yesterday, indicating that investors still think that the current rate hike program is likely in its later innings even if another few hikes are necessary before the end. Commodity action has been indecisive with Copper starting to bounce back but Crude Oil remaining under pressure.

Central banks continue to dominate the economic calendar in the coming week. The European Central Bank and the Bank of Japan are meeting this week, while the Bank of England and the Swiss National Bank meet next week. Most of these banks are still far behind the Fed and with the exception of Japan, are generally expected to continue their own respective rate hike programs.

The economic calendar for the coming week is otherwise pretty light, headlined by US retail sales today, China retail sales tomorrow, and Canada retail sales next Thursday. For the US, Monday is the Juneteenth holiday, and next Thursday brings bank stress test results.

In this edition of Equity Leaders Weekly, we look at breakouts in international developed markets and the Transportation sector as a sign of increasing bullish market breadth.

Dow Jones Transportation Average (DTX.I)

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