U.S. Economic and Market Highlights
- Revised second quarter U.S. GDP grew at a robust 4.2% annualized pace, the strongest growth rate since 2014.
- Higher government spending and business investment along with lower corporate tax rates have been main contributors.
- U.S. consumer confidence reports show that expectations for continued growth are high for the next six months.
- Better-than-expected second quarter earnings results and strong economic data overshadowed ongoing concerns about the trade conflict with China and, to a lesser extent, the European Union.
- The Trump administration announced $12 billion of emergency aid to U.S. farmers hurt by European and Chinese tariffs. These farmers include soybean producers, who have been rattled by a 15% decline in soybean prices during June.
- Foreign equities were slightly weaker than U.S. equities with the MSCI EAFE and MSCI Emerging Market indexes gaining 2.4% and 2.2%, respectively in July.
- The S&P 500 Index and NASDAQ Composite Index touched new all-time highs at the end of August, driven by positive NAFTA trade negotiations between the U.S. and Mexico and a rally in technology stocks.
- The industrials sector rebounded strongly in July after declining 3.3% in June partly due to concerns about exposure to tariffs.
- Core Personal Consumption Expenditure (PCE) price index, the Fed’s preferred inflation measure, rose to 2% year over year, boosted by average hourly earnings increase of 2.7% year over year.
- The U.S. Treasury yield curve flattened in July as Fed Chairman Powell reiterated the Fed’s plan to hike rates two additional times in 2018. The 10-year Treasury yield was only 24 basis points higher than the 2-year Treasury yield, the narrowest it has been since August 2007.
- The 10-year yields were suppressed by lower inflation expectations, along with a stronger dollar, while the 2-year yield rose in July. Spreads on high yield and agency bonds also compressed in the July.
- U.S. Treasuries, Agencies, Investment Grade corporate bonds and emerging market bonds have posted negative total returns over the past twelve-month period.
- The housing market has been weaker in recent months due to rising home prices, higher mortgage rates, a shortage of skilled labor, and higher material costs. The rising supply of homes and slower housing sales data might signal a cooling off for the overall economic growth in the quarters ahead.
The above was prepared for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security/instrument or to participate in any trading strategy. Past performance is not indicative of future results.