Please note: there will be no market commentary next week. Thank you.
Another week of new record highs for stocks, but some volatility crept into trading. For the week, the Dow turned in a nice 1.2% gain while the S&P had the slightest of losses at -0.02% and the Nasdaq was off 0.2%. Bond prices turned lower as yields moved higher. Gold had a solid week, rising 1.2%. Oil moved sharply higher for its biggest weekly gain of the year, up 8.8% to $49.79 per barrel. The international Brent oil moved up to $52.63.
Another week of new record highs for stocks, but some volatility crept into trading. For the week, the Dow turned in a nice 1.2% gain while the S&P had the slightest of losses at -0.02% and the Nasdaq was off 0.2%. Bond prices turned lower as yields moved higher. Gold had a solid week, rising 1.2%. Oil moved sharply higher for its biggest weekly gain of the year, up 8.8% to $49.79 per barrel. The international Brent oil moved up to $52.63.
Source: Google Finance
Stock markets were strong for most the week, but it looks like investors are getting a little jittery. Selling notably picked up in the tech stocks, which have seen very large gains so far this year. The dips were quickly bought and markets pushed higher, but it does show there is a growing unease amongst investors.
Earnings season had a strong effect on stocks this week. Companies that turned in results better than estimates saw their stocks pop higher. On the other hand, companies that only met or failed to meet estimates quickly moved lower. An example of this can be seen in the nearby chart.
Earnings season has been fairly good overall. About half the companies in the S&P 500 have reported results and earnings are on pace to grow almost 9%. This is well above the 6.2% originally estimated.
The Fed was in the news this week, too, with another one of their policy meetings. No changes to their economic policy were announced, which is what investors expected. They’re unlikely to pull back on their stimulus in the next few months by raising interest rates (which makes it more costly to borrow money), especially if inflation is running below their expectations.
There were several important economic reports this week, too. The big news came on Friday with the GDP report from the second quarter. GDP rose 2.6% over the past quarter, which was slightly lower than estimates but not bad. It is an improvement over the last two quarters.
Earnings season has been fairly good overall. About half the companies in the S&P 500 have reported results and earnings are on pace to grow almost 9%. This is well above the 6.2% originally estimated.
The Fed was in the news this week, too, with another one of their policy meetings. No changes to their economic policy were announced, which is what investors expected. They’re unlikely to pull back on their stimulus in the next few months by raising interest rates (which makes it more costly to borrow money), especially if inflation is running below their expectations.
There were several important economic reports this week, too. The big news came on Friday with the GDP report from the second quarter. GDP rose 2.6% over the past quarter, which was slightly lower than estimates but not bad. It is an improvement over the last two quarters.
An inflation measurement in the GDP report came in well below estimates. Remember – the Fed keeps a close eye on inflation as a guide for their stimulus policy. Low inflation makes them less likely to pull back on stimulus.
Durable goods sales were much better than expected, though this number was a little skewed by unusually large aircraft orders. Durable goods fell slightly if we were to take them out of the equation.
Several housing reports showed the amount of homes being sold are slowing, but prices are rising since the supply of homes for sale is smaller. Home price gains continue to outpace wages, which suggests overheating in this area.
Durable goods sales were much better than expected, though this number was a little skewed by unusually large aircraft orders. Durable goods fell slightly if we were to take them out of the equation.
Several housing reports showed the amount of homes being sold are slowing, but prices are rising since the supply of homes for sale is smaller. Home price gains continue to outpace wages, which suggests overheating in this area.
Lastly consumer confidence rose nicely over the past month, hitting its second-highest reading since 2000.
Next Week
We’re past the peak for corporate earnings, but next week will still be another busy one with about a fifth of companies in the S&P reporting results. There will also be several important economic reports, including data on the manufacturing and service sectors, personal income and spending, and the monthly employment report.
Investment Strategy
No change here. We’re still cautious on the market in the short term as nearly everything is on the expensive side. The market has the wind at its back right now, so we wouldn’t be surprised to see it move higher. We just think the odds of a pullback have increased and it is not attractive to put new money in at this time.
Our longer-term outlook remains a little cloudy. Much of our enthusiasm came from badly needed pro-growth policies being implemented by the Trump administration. There is a lot of pushback against these policies, so reforms may be more difficult. We are a little less optimistic on the market in the longer run, though believe it still has upside potential.
Bond prices have moved off their highs (so yields are rising), but don’t look attractive for new money.
As for the rest of the portfolio, bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. Floating-rate bonds will do well if interest rates eventually do rise.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. We keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising on geopolitical issues as a flight to safety.
Finally, in international stocks, we see weakness around the globe and favor neither the developed or emerging markets, though they are looking cheap.
Please note, these day-to-day and week-to-week fluctuations have little impact on positions we intend to hold for several years or longer. Our short and medium term investments are the only positions affected by these daily and weekly fluctuations.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
We’re past the peak for corporate earnings, but next week will still be another busy one with about a fifth of companies in the S&P reporting results. There will also be several important economic reports, including data on the manufacturing and service sectors, personal income and spending, and the monthly employment report.
Investment Strategy
No change here. We’re still cautious on the market in the short term as nearly everything is on the expensive side. The market has the wind at its back right now, so we wouldn’t be surprised to see it move higher. We just think the odds of a pullback have increased and it is not attractive to put new money in at this time.
Our longer-term outlook remains a little cloudy. Much of our enthusiasm came from badly needed pro-growth policies being implemented by the Trump administration. There is a lot of pushback against these policies, so reforms may be more difficult. We are a little less optimistic on the market in the longer run, though believe it still has upside potential.
Bond prices have moved off their highs (so yields are rising), but don’t look attractive for new money.
As for the rest of the portfolio, bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. Floating-rate bonds will do well if interest rates eventually do rise.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. We keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising on geopolitical issues as a flight to safety.
Finally, in international stocks, we see weakness around the globe and favor neither the developed or emerging markets, though they are looking cheap.
Please note, these day-to-day and week-to-week fluctuations have little impact on positions we intend to hold for several years or longer. Our short and medium term investments are the only positions affected by these daily and weekly fluctuations.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
