Weekly Market Snapshot Newsletter
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July 26, 2019

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

Real GDP rose at a 2.1% annual rate in the advance estimate for 2Q19, vs. +3.1% (unrevised) in 1Q19. Beyond the headline figure, second quarter growth was stronger than it looks, but mixed. Slower inventory growth subtracted 0.86 percentage points from headline GDP growth, while net exports (a wider trade deficit) subtracted 0.65 ppt. Consumer spending growth rose at a 4.3% annual rate, rebounding from two soft quarters (+2.6% y/y). Business fixed investment fell 0.6%, with declines in business structures and transportation equipment (Boeing). Residential fixed investment (homebuilding and repairs) fell for the sixth consecutive quarter. Government spending rose more than anticipated, adding 0.85 ppt to headline growth, reflecting a 15.9% surge in federal nondefense spending (which followed declines in 4Q18 and 1Q19).

Next week, the Federal Open Market Committee is widely expected to lower the target range of the federal funds rate by 25 basis points. Given that rates are relatively close to the 0% lower bound, the Fed should be more aggressive (lowering rates sooner and faster) if it thinks it should move in that direction. However, there’s no need to panic. Most Fed officials will see a 25 basis point cut as an insurance move, not the beginning of a series of rate reductions. Investors will be looking to the wording of the policy statement and to Chair Powell’s press conference for clues about possible future moves.

There are a number of important upcoming economic data releases. June personal income and spending figures (Tuesday) will help to gauge the momentum in consumer spending growth into 3Q19. The ISM Manufacturing Index (Thursday) is expected to remain soft. Friday’s nonfarm payroll figure will be subject to seasonal noise related to the end of the school year and the start of the summer travel season.

Indices

Last Last Week YTD return %
DJIA 27140.98 27222.97 16.35%
NASDAQ 8238.54 8207.24 24.16%
S&P 500 3003.67 2995.11 19.82%
MSCI EAFE 1918.99 1906.32 11.58%
Russell 2000 1561.45 1555.62 15.79%

Consumer Money Rates

Last 1 year ago
Prime Rate 5.50 5.00
Fed Funds 2.40 1.90
30-year mortgage 3.88 4.72

Currencies

Last 1 year ago
Dollars per British Pound 1.246 1.310
Dollars per Euro 1.115 1.164
Japanese Yen per Dollar 108.63 111.23
Canadian Dollars per Dollar 1.317 1.307
Mexican Peso per Dollar 19.022 18.626

Commodities

Last 1 year ago
Crude Oil 56.02 69.61
Gold 1427.50 1235.30

Bond Rates

Last 1 month ago
2-year treasury 1.85 1.74
10-year treasury 2.07 2.01
10-year municipal (TEY) 2.37 2.49

Treasury Yield Curve – 07/26/2019

Chart
As of close of business 07/25/2019

S&P Sector Performance (YTD) – 07/26/2019

Chart
As of close of business 07/25/2019

Economic Calendar

July 30  — Personal Income and Spending (June + benchmark revisions)
 — CB Consumer Confidence (July)
July 31  — ADP Payroll Estimate (July)
 — Employment Report (July)
 — FOMC Policy Decision
 — Powell Press Conference
August 1  — ADP Payroll Estimate (July)
 — ISM Manufacturing Index (July)
August 2  — Employment Report (July)
August 5  — ISM Non-Manufacturing Index (July)
August 15  — Retail Sales (July)
September 2  — Labor Day (markets closed)
September 18  — FOMC Policy Decision

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor’s returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business July 25, 2019.

By | 2019-07-29T16:30:44+00:00 July 29th, 2019|Latest Articles, Weekly Market Snapshot|