Despite the strong labor market report, some assets easily reached new all-time highs. This includes the S&P500, Nasdaq100, Magnificent7 and Apple.
On June 11, Mag7 increased by as much as 1.81% (mainly due to Apple (+7.26%) and partly Microsoft +1.12%) - see Figure 1 and 2. Mag7 is already +6.28% in June (after +10.60% in May). And Apple in June is already +7.75% (after a strong May +12.87%).
Apple has partnered with OpenAI and will integrate their Chat GPT into its products. It is an interesting situation that such a large company, with virtually (unlimited) resources, is to some extent eliminated from the race to create its own AI model. Elon Musk has publicly stated that "It's patently absurd that Apple isn't smart enough to make their own AI."
In the race for the best and largest AI models, OpenAI Microsoft, Google DeepMind (Gemini) and Meta Platforms are currently in first place.
However, other asset classes have been behaving since the publication of the US labor market report as if they were undergoing a major risk-off correction. Yields of 10Y UST jumped up by almost 20 bps (currently only 10-12 bps - after a very good 10Y auction on June 11). EURUSD is down by approximately 1.4-1.5% (Figure 3). Gold fell from levels of $2,380 to below $2,300 (currently $2,315 - Figure 4).
So what's next? In the short term, a lot depends on today's US CPI inflation. It is possible that it will decide on where the median FED’s interest rate will be in today’s new FED projection. In the March projection, the median was 4.6% as of the end of 2024 (three rate cuts). In today’s June projection, the Fed may decide to raise the median dot (to two cuts if today's inflation is softer, or even to only one cut in the case of hot inflation). The Fed will announce its new projections later today after the inflation report.
In the medium term, a lot will depend on inflation readings in the coming months. However, AI-related companies can continue to perform largely regardless of macro data and inflation itself. It is possible that even after weaker inflation readings in the coming months, they will continue to outperform the broader market.