Generally solid economic data and earnings are continuing to propel the bullish momentum. The Dow Jones touched and crossed the 22,000 level mid-week while the S&P 500 fell just short of last week’s all-time record. Most global indices were up as well on the positive data. The S&P 500 edged up 0.2% and the MSCI ACWI climbed 0.4% and set a record high early in the week. The BarCap U.S. Aggregate Bond Index rose 0.2%.The monthly U.S. jobs report provided broadly encouraging news. The economy added 209,000 jobs, which was a strong number and bested expectations of 180,000 new jobs. Other data points were positive as well.
For July, Markit global manufacturing PMI came in at 52.7 up from 52.6 in June. Growth was led by the Eurozone while most Asian economies, except China, continued to struggle. In the U.S., the index rose to 53.2 from 52 in June. We note, while new orders were increasing at a faster rate, input prices also continue to rise at a faster pace. Manufacturers seem to be benefiting from improving demand conditions and lower risk averseness.
What are we reading?
Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links:
The U.S. jobs reports produced a strong set of numbers. Most importantly, non-farm payrolls rose by 209,000, beating expectations of 180,000. The secondary data points were also positive. The unemployment rate dropped to 4.3%. The decline in the unemployment rate was impressive as the participation rate rose 0.1%, indicating more people sought employment. Hourly earnings rose 2.5%. The data suggests the U.S. economy continues to grow at a moderate pace.
The global manufacturing sector registered a month of improved business conditions in July. Although output growth slowed to a 10-month low, the pace of expansion in new orders strengthened. Additionally, the rate of expansion picked up to the fastest since April but remained milder than at the start of the year.
China seems serious about deleveraging but the reality looks different. New total social financing grew by 14.5% (vs 10.8% y-o-y) in the first half of 2017, roughly 3% faster than GDP growth. What seems to be changing is the borrower. While loans to non-financial grew a modest 8%, total loans to households are up 24%.
Fun Story of the Week
In the week where select football players are enshrined in the NFL Hall of Fame, we are nominating two nominees to the Lady Jane Grey Hall of Short-Term Employment. Grey’s nine-day reign as queen of England in 1553 is known mostly for its brevity. Our first nominee is Anthony Scaramucci, who was named White House communications director on July 21, assumed the role on July 25 and was fired July 31. As communications director, he will best be remembered for his profanity-laced interview criticizing his new colleagues. Perhaps the initial vetting process wasn’t effective.
Pitcher Jaime Garcia, our second nominee, tied a 122-year-old record by making three consecutive starts for three different teams. After starting the year with the Atlanta Braves, on July 24 Garcia was dealt to the Minnesota Twins to bolster their playoff chances. While he won his only start, the Twins slumped and the completion soared. As the trade deadline approached, the Twins dealt him to the Yankees just six days after acquiring him. Interestingly, Scaramucci’s White House career and Garcia’s time as a Twin overlapped for five of their six days on the job.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of CWM, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large and mid-cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.