Special Quarterly Update: Q2 Coming Into Focus

Last Friday, stocks closed on more record highs. The S&P 500 rose 1.41%, and the Dow climbed 1.04% -- both closing at new peaks.[1] The NASDAQ reported a 2.58% gain, and the MSCI EAFE posted a 2.38% increase.[2] Despite continuing headlines from Washington, the markets remain productive and strong.[3] New Q2 numbers also rolled in last week, giving us a clearer picture of what happened from April through June. 

Q2 Coming Into Focus

Over the second quarter, the S&P 500 rose 2.57%; the Dow gained 3.32%; and the NASDAQ jumped 3.87%.[4] Meanwhile, the MSCI EAFE improved by 5.0%.[5] Analysts are now predicting that Q2 Gross Domestic Product (GDP) will grow to 2.4%, stronger than Q1's soft 1.4% increase.[6] 

While we wait for more numbers and reports, here are some highlights so far:  

  • Corporate Earnings: Corporate Earnings should remain strong for Q2, with an expected S&P 500 earnings growth of 6.5%.[7] As of July 14th, only 6% of S&P 500 companies have reported earnings.[8]
  • Core Consumer Pricing: Core Consumer Pricing, which measures the price of consumer goods excluding food and energy, remained at 60-year historically low levels. June's numbers increased by only 0.1%, the third month in a row for low rates.[9] 
  • Retail Sales: Retail sales were soft, declining unexpectedly by 0.2% following May's 0.1% drop and April's 0.3% rise.[10] 
  • Labor Market: Employers hired at a record increase of 8.3% in May, filling 5.5 million jobs. Consequently, job openings fell in May to 5.66 million from April's strong 6.0 million.[11] The strong labor market further reflected in June's low unemployment rate of 4.4%.[12]

On the international front, global economic growth is set to post a predicted 3.0% increase for Q2. Emerging and advanced economies both should record positive results based on strong global trade growth and favorable economic indicators. Both China and Japan are expected to post strong economic growth.[13]

News From Last Week and Looking Ahead

For Q3 and Q4, the economy should continue to produce strong job data and decent housing markets, along with growing investments in businesses. For the year, the economy is expected to expand at an estimated 2.2% in 2017.[14] With that said, consumer sentiment fell to 93.1 in July, much lower than expected.[15]Because consumer spending makes up more than two-thirds of the economy, the markets will continue to follow consumer attitudes and spending.[16] Given current global economic trends, some analysts expect the global economy to grow by 3.0% for 2017.[17]

Finally, Fed Chair Janet Yellen testified before Congress last week. She confirmed that the Fed's reduction in its $4.5 trillion balance sheet -- known as "tapering" -- will start later this year. She also suggested that interest rate hikes might continue for a couple of more years.[18] With inflation hovering at 1.4%, however, the Fed may be losing confidence in reaching its targeted goal of an annual 2% increase.[19] Meanwhile, The Bank of Canada has followed the Fed's lead by raising its interest rates 25 basis points to 0.75%, its first raise since 2010.[20]

As always, we are here to help you navigate the often complex economic environment. Contact us if you have any questions about how this information may impact your financial life. 

ECONOMIC CALENDAR

  • Monday: Empire State Manufacturing Survey
  • Tuesday: Import and Export Prices, Housing Market Index
  • Wednesday: Housing Starts
  • Thursday: Jobless Claims, Philadelphia Fed Business Survey Outlook, Fed Balance Sheet
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5- year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5- year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. 

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia. 

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Gross Domestic Product (GDP) is a measure of output from U.S. factories and related consumption in the U.S.  It does not include products made by U.S. companies in foreign markets.

The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.

Inflation is the rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market. 

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US 

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US 

[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO 

https://www.msci.com/end-of-day-data-search 

[3] http://www.cnbc.com/2017/07/14/us-stocks-earnings-banks-data.html 

[4] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US 
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[5] https://www.msci.com/end-of-day-data-search 

[6] https://www.frbatlanta.org/cqer/research/gdpnow.aspx
https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm 

[7]https://insight.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_070717.pdf

[8] https://insight.factset.com/earningsinsight_07.14.17?utm_source=hs_email&utm_medium=email&utm_content=54271802&_hsenc=p2ANqtz-9_kL0yzB9fZRNdOk1k-9UMjLIJeJTd90ycA45w2tc-orqRS2m7CHSg6IkPz6j5ISwjmZcVT4iyG8zGhjZvByTrBDHM7Q&_hsmi=54271802 

[9] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477396&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[10] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477713&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[11] http://wsj-us.econoday.com/byshoweventfull.asp?fid=478571&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[12] https://www.bloomberg.com/news/articles/2017-07-12/yellen-s-take-on-inflation-shifts-subtly-in-remarks-to-congress?cmpid=BBD071217_BIZ&utm_medium=email&utm_source=newsletter&utm_term=170712&utm_campaign=bloombergdaily

[13] http://www.focus-economics.com/regions/major-economies 

[14] http://www.focus-economics.com/regions/major-economies 

[15] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477847&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[16]  http://wsj-us.econoday.com/byshoweventfull.asp?fid=477847&cust=wsj-us&wiconly=1&lid=0#top 

[17] http://www.focus-economics.com/regions/major-economies 

[18] http://wsj-us.econoday.com/byshoweventfull.asp?fid=482143&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top 

[19] http://www.cnbc.com/2017/07/12/dovish-yellen-indicates-that-fed-may-not-need-to-hike-rates-much-more.html?__source=newsletter%7Ceveningbrief 

https://www.bloomberg.com/news/articles/2017-07-14/little-change-in-u-s-consumer-prices-shows-modest-inflation 

[20] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=482312&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

Markets Start Second-Half Slow

As the country celebrated the Fourth of July last week, the markets experienced some volatility, though they finished a bit flat overall.[1] The Dow fell then rose to close the week up 0.30%.[2] The S&P 500 climbed a modest 0.07% for the week, and the NASDAQ finished the week up 0.21%.[3] The MSCI EAFE fell 0.48%.[4]

Internationally, European markets posted soft gains on Friday, though emerging markets fell for a second-straight week.[5] Further, gold dropped to a 5-month low, while bond yields rose globally on weakening bond markets.[6] In addition, world leaders met last week at the G20 Global Summit and issued a statement supporting open markets. They agreed to fight unfair trade practices, such as countries blocking or heavily taxing imports to protect domestic industries.[7]

A Closer Look at U.S. Market News

  • Auto Sales Continue to Drop: Auto sales dropped in June by 3% from a year ago. Though vehicle sales are still generally high, numbers in the second half of 2017 are expected to remain soft.[8] 

  • Employment Numbers Give Mixed Signals: Payroll growth rose a strong 222,000, exceeding expectations of 170,000. The employment growth numbers, along with continuing low unemployment figures, reflect a high demand for workers. However, wage growth remains low at an annual rate of 2.5%.[9]
  • Inflation Stays Weak: Inflation came in at a weak 1.4% in May, staying well below the Fed's target of 2.0%. Despite weak inflation numbers, the Fed appears committed to raise interest rates one more time this year.[10] 
  • Manufacturing Rises and Falls: The PMI manufacturing index closed at a low 52.0, down from May's 52.7 on weak cost pressures and selling prices.[11] Meanwhile, some good news emerged: The ISM manufacturing index surprised expectations of 55.1 and rose to 57.8 -- the strongest number since August 2014.[12] 
  • Oil Prices Continue to Slump: Oil dropped to $44.33 per barrel on continuing oversupply concerns.[13] The week's price erosion comes after a 14% drop in the first half of 2017.[14]

A Look Ahead

On Friday, July 14, key economic data will emerge such as consumer price index, retail sales, and consumer sentiment.[15] As we look to the second half of 2017, a variety of developments could boost markets: strong corporate earnings, strengthening wage rates, and growing global trade and Gross Domestic Products (GDPs).[16]

We want to remind you to avoid letting geopolitical ups and downs sway your investment focus. Instead, stay tuned to the fundamentals as you work toward your long-term goals. Feel free to contact us for any perspectives that can help you make sense of your financial life.

ECONOMIC CALENDAR

Tuesday: Job Openings and Labor Turnover Survey(JOLTS)
Wednesday: Beige Book
Thursday: Jobless Claims
Friday: Consumer Price Index, Retail Sales, Industrial Production, Business Inventories, Consumer Sentiment

 


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia.

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Gross Domestic Product (GDP) is a measure of output from U.S. factories and related consumption in the U.S.  It does not include products made by U.S. companies in foreign markets.

The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.

Inflation is the rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

[1] https://www.bloomberg.com/news/articles/2017-07-07/motion-sickness-grips-stocks-on-eve-of-a-healthy-earnings-season

[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US

[3] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[4] https://www.msci.com/end-of-day-data-search

[5] http://www.reuters.com/article/us-europe-stocks-idUSKBN19S0VT
http://www.reuters.com/article/emerging-markets-idUSL8N1JY1VU

[6] http://www.cnbc.com/2017/07/07/gold-on-track-for-5th-straight-weekly-loss-after-strong-jobs-report.html

https://www.bloomberg.com/news/articles/2017-07-06/bond-rout-deepens-as-asia-stocks-set-to-join-drop-markets-wrap

[7] http://www.cnbc.com/2017/07/08/g-20-communique-agreed-apart-from-climate-issue--eu-officials.html

[8] https://www.usatoday.com/story/money/cars/2017/07/03/june-2017-auto-sales/447511001/
https://www.usatoday.com/story/money/cars/2017/06/30/auto-sales-like-continue-falling/103314604/

[9] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477421&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top
http://wsj-us.econoday.com/byshoweventfull.asp?fid=477453&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[10] http://www.cnbc.com/2017/07/03/expect-one-more-u-s-rate-hike-this-year-even-if-ivanka-trump-is-leading-the-fed-ubs-economist-says.html

[11] http://wsj-us.econoday.com/byshoweventfull.asp?fid=478122&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[12] http://wsj-us.econoday.com/byshoweventfull.asp?fid=477878&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

[13] http://www.cnbc.com/markets/
https://finance.yahoo.com/news/other-culprits-oil-price-crash-230000013.html

[14] http://www.cnbc.com/2017/06/29/crude-oil-prices-firm-set-for-biggest-weekly-gain-since-mid-may.html

[15] http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other

[16] http://pubdocs.worldbank.org/en/997531493655496869/Global-Economic-Prospects-June-2017-Highlights-Chapter-1.pdf
https://www.bloomberg.com/news/articles/2017-07-06/bond-rout-deepens-as-asia-stocks-set-to-join-drop-markets-wrap
http://www.cnbc.com/2017/07/05/the-global-economy-is-doing-something-it-hasnt-done-in-7-years.html?__source=newsletter%7Ceveningbrief