As we reach the midway point of 2023, the prevailing narratives at the start of the year centered around concerns of an impending recession, rising interest rates, and corporate layoffs. However, with the major indices delivering positive results, investors are finding themselves increasingly optimistic about the future.
One key indicator shedding light on this sentiment is the Sell Side Indicator, which tracks the average recommended allocation for stocks by US sell side strategists. Acting as a contrarian indicator, it suggests that the more bearish the analysts’ outlook, the better the prospects for stocks, and vice versa.

(Source: BoA Global Research)
The accompanying chart illustrates the strategists’ recommended stock allocations as of June 30th. The blue line represents the current state, flanked by the green line denoting bearish sentiment and the red line indicating bullish sentiment. While strategists remain relatively bearish compared to the 15-year average (at 52.9% versus 54.8%), there was a modest uptick of 0.33% in June. Although this increase may appear small, it marks the most significant rise since November 2022. While the Sell Side Indicator is just one among various gauges, reviewing equity sentiment is crucial and could support the argument that we might continue surmounting the “wall of worry” in the stock market.
A New Perspective on Inflation
Inflation has dominated market discussions for the past 18 months, but some argue that the Federal Reserve’s analysis relies on outdated data. Enter Truflation, a research company that has devised a methodology to delve into millions of real-time data points related to inflation. Their approach aims to capture the current state of inflation rather than focusing solely on historical trends. Their findings challenge the official reports, suggesting that inflation last summer was closer to 12% instead of the government’s reported 9.1%. However, let’s take a closer look at Truflation’s latest observations.

Yes, you read that correctly. According to Truflation’s estimations, the current inflation rate stands at 2.23%, slightly above the Federal Reserve’s target of 2.0%. In contrast, the government officially reported the Consumer Price Index (CPI) at 4.0%. This disparity holds significance because several indicators indicate that inflation is moderating towards the Fed’s desired goal. However, during the last Federal Open Market Committee (FOMC) meeting, Jay Powell suggested that while the Fed is pausing for now, future rate hikes remain a possibility.
Truflation offers a fresh perspective on the inflation landscape, providing real-time insights that challenge conventional analyses. While the current estimate aligns more closely with the Fed’s target, the ongoing discussions and potential future rate hikes highlight the need for continued vigilance in monitoring inflationary trends.
Promising Trends: Stock Performance Following 10%+ Gains in the 1st Half
Over the past three decades, there have been ten instances, including the current year of 2023, where the stock market experienced a gain of more than 10% in the first half of the year. Interestingly, in each of the previous nine occurrences, the market continued to rise in the second half, yielding an average return of 11.2%

This impressive average presents an encouraging outlook. However, it’s important to remember that past performance does not guarantee future results. It’s worth noting that the last time the S&P 500 recorded negative returns in the second half following a first-half rally of 10% or more was in 1987. Market historians attribute this decline to the infamous “Black Monday” on October 19, 1987, when the Dow Jones plummeted by a staggering 22.6% in a single day.
Articles We’re Reading
India’s richest man is launching a new model of internet-connected mobile phone for $12(Inventiva)
A flying car prototype just got an airworthiness certificate from the FAA (CNN Business)
China continues to sign long-term natural gas deals to bolster energy security (Bloomberg)
Goldman Sachs in talks to move its Apple financial products business to American Express (CNBC)
Market Snapshot
For the Month Ending 6/30/2023 (Cumulative Returns)1

1Source – Morningstar, Inc. Corporate Bonds is presented as the iShares iBoxx $ Investment Grade Corporate Bond ETF. Municipal Bonds is presented as the iShares National Municipal Bond ETF. High Yield Bonds is presented as the iShares iBoxx $ High Yield Corporate Bond ETF. 10 Year Treasury refers to the valuation of a 10 Year Treasury Note, a debt obligation issued by the U.S. Department of the Treasury. Fed Funds Target represents upper limit of the federal funds target range established by the Federal Open Market Committee. Inflation Rate provided for the purposes of this report by the U.S. Bureau of Labor Statistics. Unemployment Rate calculated by the U.S. Bureau of Labor Statistics. WTI Crude Oil refers to the price of a barrel of West Texas Intermediate NYMEX) Crude Oil. Gold – Spot Price relates to the valuation of an ounce of gold, as traded on the NYSE Arca Exchange. U.S. Dollar refers to the U.S. Dollar Index (DXY). All Returns are denominated in USD (United States Dollar), unless otherwise explicitly noted.
Did You Know?
Fireworks on the 4th of July have a fascinating history. The tradition of fireworks can be traced back to ancient China, where gunpowder was invented. Initially used for medicinal and mystical purposes, the Chinese soon discovered the explosive properties of gunpowder for entertainment. Firecrackers emerged as a popular form of celebration during festivals, believed to ward off evil spirits.
The knowledge of fireworks traveled along the Silk Road, reaching Europe in the 14th century. Fireworks became a favorite entertainment choice for kings and nobles, dazzling their guests with spectacular displays. As European settlers arrived in America, they brought fireworks with them, incorporating them into early American celebrations. In 1777, the first official Independence Day celebration included fireworks, and since then, fireworks have become an inseparable part of the 4th of July, symbolizing joy, patriotism, and the spirit of freedom.
Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser
The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.