Markets experienced a push-and-pull last week between data indicating strong economic growth and lagging performance from several tech stocks’ earnings reports. Domestic indexes had mixed results, as the S&P 500 gained 0.61%, the Dow was up 1.57%, and the NASDAQ dropped 1.06%. International stocks in the MSCI EAFE had more of an uptick, gaining 1.32% for the week.
On Friday, July 27, we received the initial reading of 2nd quarter Gross Domestic Product (GDP). The report indicated that the economy grew at a 4.1% annual rate between April and June. This reading was the fastest pace in almost 4 years and significantly higher than 1st quarter growth. Markets, however, had a relatively mild reaction to the GDP data due to rumors predicting even higher results.
Let’s dig beyond the headline GDP growth number to see what else it tells us about our current economic circumstances.
2nd Quarter GDP Details
• The tax cut helped drive growth.
The recent $1.5 trillion tax cut contributed to the latest GDP performance. Both consumers and businesses spent more in the 2nd quarter. Some economists believe this result will not last; without further tax cuts, consumers and companies won’t have additional funds at their disposal.
• Trade tension affected GDP.
This year’s ongoing trade drama impacted the economy during the 2nd quarter, but perhaps not the way you might expect. Many soybean farmers tried to get ahead of coming tariffs by shipping their crops to China earlier than normal. This move helped GDP increase between April and June.
• Inflation slowed.
When examining inflation, the Fed uses the personal consumption expenditures (PCE) without food and energy, also known as the core PCE. The 2nd quarter reading was 2%, down from 2.2%. Between healthy economic growth and solid inflation numbers, the Fed is likely still on track for two more rate hikes in 2018.
Seeing strong growth this late in an economic expansion is good news. However, now we will have to see whether the growth can continue at this rate. When discussing the GDP readings, President Trump predicted even better results in future quarters. Some economists, on the other hand, believe trade wars and consumer spending could provide headwinds.
We can’t predict the future, but we do know that economic fundamentals continue to be strong. This week, we will receive a number of new readings from manufacturing to employment to motor vehicle salesand earnings season will roll on.
If you would like to discuss any of these details and how they may impact you, we’re ready to help.
Tuesday: Personal Income and Outlays, Consumer Confidence
Wednesday: Motor Vehicle Sales, ADP Employment Report, PMI Manufacturing Index, ISM Mfg Index
Thursday: Factory Orders, Jobless Claims
Friday: Employment Situation, International Trade, PMI Services Index, ISM Non-Mfg Index
Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues.
If you would like us to add them to our list,
simply click on the “Forward email” link below. We love being introduced!
If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.
The content of this article is for informational purposes only and is not intended as an offer of investment advice, investment strategy or to buy, transfer or sell any security or other investment vehicle. Information contained herein has been obtained from sources deemed reliable but Spire Wealth Management LLC, Spire Securities LLC and their affiliates, including Compass Asset Management Group LLC, do not guarantee its accuracy. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions of Spire Wealth Management LLC, Spire Securities LLC or its affiliates.
Spire Wealth Management LLC is a federally Registered Investment Advisor. Securities offered through an affiliate, Spire Securities LLC. Member FINRA/SIPC
By accessing any links contained in this article you will be leaving Spire Wealth Management LLC & its affiliates and Compass Asset Management Group LLC websites and entering a website hosted by another party. Although Spire Wealth Management LLC & its affiliates and Compass Asset Management Group LLC have approved these as reliable partner sites, please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Spire Wealth Management LLC & its affiliates Compass Asset Management Group LLC websites. The other parties are solely responsible for the content of their websites. We encourage you to read and evaluate the privacy and security policies on the sites you are entering, which may be different than those of Spire Wealth Management LLC & its affiliates Compass Asset Management Group LLC.
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 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.
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.
By clicking on these links, you will leave our server, as the links are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site