August Economic Update
Positive earnings announcements and fundamental indicators lifted blue chips and other stock market indices in July with the Dow Jones Industrial Average gaining 2.54%. Hiring and manufacturing data were particularly reassuring and annualized inflation declined once more.
Oil, gold, and other marquee commodities gained last month in addition to many Asia-Pacific stock benchmarks. In the real estate market, home buyers coped with slim supply and high median prices as mortgage rates crept up. (1)
NEW RECORD HIGHS FOR THE DOW JONES
On Tuesday of this week, the Dow Jones Industrial Average reached another impressive milestone of 22,000. In July, the Nasdaq Composite had another great month advancing 3.38% with the S&P 500 gaining a relatively modest 1.93%. The markets were generally left uninterrupted among political and international drama and aided by strong earnings from U.S. corporations. (1)
INFLATION WEAKENS & CONSUMERS ARE FEELING OPTIMISTIC
The Bureau of Labor Statistics published Consumer Price Index report for the previous month of June which showed inflation remained unchanged. The CPI has a yearly advance of only 1.6% - nearly half a point below the Federal Reserve’s target.
With low inflation, record stock market highs, and unemployment reaching new lows, consumer confidence is near a 16-year high according to the Conference Board’s index. (2,3,4)
HOME PRICES RISE SLIGHTLY - INVENTORY SHORTAGE CONTINUES
The home inventory shortage continues and only a modest 0.8% increase in home prices was cited according to the latest National Association of Realtors report released last week. Although demand remains high, home buyers are putting the brakes on purchasing this season with new home sales about 30% below the 50-year average for the previous month of June. (5)
We have witnessed some remarkable tranquility on Wall Street. To put things into perspective, by the end of July, the S&P 500 had not had a 3% decline in almost nine months. Volatility, as measured by the CBOE VIX (or volatility index) remains historically low. (6)
The economy keeps slowly growing without any major signs of a recession looming. As we enter into late summer, which is traditionally a weak stretch for stocks, August could still provide investors with more upside than downside – with the usual exception of an unforeseen event.
1.) barchart.com/stocks/indices#/viewName=performance [7/31/17]
2.) investing.com/economic-calendar/ [7/31/17]
3.) briefing.com/investor/calendars/economic/2017/07/24-28 [7/28/17]
4.) marketwatch.com/story/fed-to-wind-down-bond-holdings-relatively-soon-2017-07-26 [7/26/17]
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.