Monthly Market Insights | July 2019

U.S. Markets

The stock market rode a wave of optimism this month, thanks to continued belief in a potential interest rate cut by the Federal Reserve and the lessening U.S.-China trade tensions.

The Dow Jones Industrial Average picked up 7.19 percent, while the Standard & Poor’s 500 Index rose 6.89 percent. The NASDAQ Composite led, gaining 7.42 percent.1

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Stocks opened the month lower, but soon rallied on the belief the Fed would adjust interest rates. A sluggish jobs report added fuel to the fire, further increasing investors’ confidence in a future rate cut.

Stocks gained on news that Mexico and the U.S. had averted further tariffs on Mexican imports. The rebound lost momentum, however, as tensions rose in the Middle East after shipping disruptions in the Gulf of Oman.

All Eyes on the Fed

At its June meeting, Federal Reserve officials issued a more "dovish" statement that indicated it would consider policy actions to sustain economic growth.

Investors interpreted the Fed statement to mean that rates could be adjusted as early as July. The enthusiasm helped ignite the next leg of June's rally, with the S&P 500 touching a new record high and the Dow Industrials and the NASDAQ Composite finishing a hairsbreadth from their historical peaks.

Mixed Signals

Stocks climbed again on the heels of a positive trade discussion between President Trump and China's President Xi – only to fall in response to comments by Fed Chair Powell, indicating continued uncertainty regarding the timing of any rate adjustment.

Sector Scorecard

All industry sectors, save Real Estate (-0.27 percent) and Utilities (-0.72 percent), moved higher in June, led by strong gains in Materials (+7.85 percent) and Technology (+6.48 percent). Prices also advanced in Communication Services (+1.60 percent), Consumer Discretionary (+4.79 percent), Consumer Staples (+1.03 percent), Energy (+2.21 percent), Financials (+1.30 percent), Health Care (+3.09 percent), and Industrials (+3.84 percent).2

U.S. Market Recap for June 2019
S&P 500 6.89% Month ‌ 17.35% Year-to-Date	NASDAQ 7.42% Month ‌ 20.66% Year-to-Date	Russell 1000 6.86% Month ‌ 17.68% Year-to-Date	10-Year Treasury 2.00% Month ‌ -0.69% Year-to-Date
Yahoo Finance, June 30, 2019. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

What Investors May Be Talking About in August

The Federal Reserve ultimately kept interest rates unchanged, but tempered this news by stating that they would continue to monitor economic news and react in an appropriate manner to maintain the current economic expansion.

Investors may start looking to critical economic data and continued trade negotiations to anticipate future Fed actions.

Secrets of the Temple

Some investors believe that the Fed may support stock prices with its monetary policy. The comments made by Fed Chair Powell in January helped fuel a first-quarter rally. And in June, trade comments made by Powell also helped support the June gain.3

It’s impossible to predict what actions the Fed will take on interest rates or how the markets will react. But if the Fed sees stronger economic numbers and adopts a more-neutral stance on interest rates, that may prompt investors to temper their expectations.

World Markets

Overseas markets rebounded in June, with the MSCI-EAFE Index climbing 5.31 percent.4

European markets benefited from comments by Mario Draghi, President of the European Central Bank. Draghi stated that he is prepared to loosen monetary reins to stimulate lethargic E.U. economies.

France tacked on 5.6 percent, while Germany rose 5.7 percent. The U.K. lagged a bit, but still picked up 3.3 percent.5

Pacific Rim stocks posted strong returns, with Australia climbing 3.5 percent; Hong Kong, 4.4%; Japan, 3.3 percent.6

World Market Recap for June 2019
Emerging Markets	June	Year-to-Date
Hang Seng (China)	6.10%	10.43%
Kospi (Korea)	4.35%	4.39%
Nikkei (Japan)	3.28%	6.30%
Sensex (India)	-0.80%	9.22%
Jakarta Composite (Indonesia)	2.41%	2.65%
Bovespa (Brazil)	4.06%	14.88%
IPC All-Share (Mexico)	0.96%	3.65%
Merval (Argentina)	23.11%	37.98%
ASX 200 (Australia)	3.47%	17.22%
Europe
DAX (Germany)	5.73%	17.42%
CAC 40 (France)	5.64%	17.09%
Dow Jones Russia Index (Russia)	7.34%	29.21%
FTSE 100 (Great Britain)	3.29%	10.62
Yahoo Finance, June 30, 2019. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

Gross Domestic Product

First-quarter economic growth remain unchanged at 3.1 percent (though, consumer spending was revised to a slower rate), while business spending, exports, and government contributions were revised higher.7

Employment

Job growth slowed in May, with nonfarm payrolls increasing by 75,000. The unemployment rate was steady at 3.6 percent, while wage growth slowed to a 3.1 percent rise. 8

Retail Sales

Consumer buying strengthened in May, rising 0.5 percent, while April’s reported 0.2-percent decline was revised to an increase of 0.3 percent.9

Industrial Production

Output at the nation’s factories, mines, and utilities rose 0.4 percent in May.10

Housing

Housing starts sagged 0.9 percent, as high prices and low inventory appear to have outweighed a decline in mortgage rates and the healthy labor market.11 Sales of existing homes rose 2.5 percent in May, exceeding market expectations.12 Sales of new homes disappointed for the second consecutive month, dropping 7.8 percent, despite the tailwinds of falling mortgage rates and increased supply.13

Consumer Price Index

Consumer prices rose by 0.1 percent in May, suppressed by a steep decline in energy costs. For the 12-month period, inflation registered an increase of 1.8 percent.14

Durable Goods Orders

For the third time in four months, durable goods orders declined, sliding 1.3 percent. A sharp drop in civilian aircraft orders and lower defense-related purchases were the leading reasons for the weak number. Excluding these sectors, orders of durable goods were up 0.6 percent.15

The Fed

The Fed elected to hold interest rates steady at its two-day June meeting, hinting at the possibility of a rate cut some time this year.16

Though the Fed believes that the economy is poised to continue expanding at a moderate rate, it did acknowledge the increasing risks to sustaining growth, with trade and global economic uncertainties of particular concern.17

By the Numbers