Historically, the summer months have been a time when the stock market can tend to slump as vacations are plentiful and economic news slows. This was not the case in July as the market posted respectable gains on Wall Street. The S&P gained 3.60% for the month and finally managed to break its price range which began back in February, but remains under its all-time high set back in January. The tech-heavy Nasdaq, which had outperformed the S&P for the past several months, eased its pace but gained a healthy 2.15%. (1)
For the year, all three of the major U.S. indices are firmly in the green as of the close on July 31:
S&P 500: +2.82% Nasdaq: +11.13% Dow Jones: +2.82% (1)
The ongoing trade feud with China, Canada, Mexico, and the European Union continues as negotiations and compromises were made, along with new threats between the U.S. and China. The Trump administration has considered increasing tariffs from 10% to 25% which would take effect this fall. China once again retaliated with additional tariffs of their own for U.S. imports. (2)
To our North, Canada acted to impose a 25% import tax on American steel products and a 10% import tax on assorted U.S. consumer, food, and agriculture exports coming through its borders. On July 25, President Trump and European Commission President Jean-Claude Junker agreed to lower the respective industrial tariffs postpone others (such as the planned 25% U.S. tax on European-built autos) pending further talks. (2,3)
The U.S. Economy
The most recent jobs report from the Department of Labor showed a net gain of 157,000 jobs in July. Wages were also rising at a rate of 2.7% a year by the end of the second quarter of 2018. One side effect of a healthy economy is inflation. The latest CPI index showed inflation increasing at 2.9% per year, which is the highest rate since February of 2012. (4,5)
Home values continued their healthy appreciation with home prices up 6.5% year-over-year through the end of May. Prospective buyers could take heart in the fact that mortgage rates were little changed in late July from where they were in late June. There were new reports from the National Association of Realtors and Census Bureau which showed home sales weakening in June. The slip in resales was minor: only 0.6%. It was, however, the third consecutive monthly retreat for existing home purchases – and last spring, they slowed to a pace unseen since January. (6)
The Months Ahead
As anticipated, the second half of the year started off positive as corporate earnings provided a solid boost and July marked the fourth straight positive month for the markets. As the final earnings reports are released for this quarter, investors will be looking for more positive economic signals in order to negate unanswered questions about global uncertainties. A lack thereof may cause jitters in the coming months, but that does not rule out the possibility of continued growth through the fourth quarter.
Monthly Financial Tip:
Summer is an ideal time to organize your tax records. Contact your CPA and ask for a mid-year tax check-up. Opportunities for savings may emerge.
1 - barchart.com/stocks/indices?viewName=performance [7/31/18]
2 - bloomberg.com/news/articles/2018-07-31/u-s-china-said-to-seek-to-restart-talks-to-defuse-trade-war [7/31/18]
3 - investors.com/news/economy/trade-war-trump-juncker-announce-deal-pulling-back-from-u-s-eu-from-brink/ [7/25/18]
4 - https://www.bls.gov/news.release/empsit.nr0.htm
5 - tradingeconomics.com/united-states/inflation-cpi [7/12/18]
6 - tradingeconomics.com/united-states/existing-home-sales
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.