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Stock prices were sharply higher in July, propelled by positive economic reports and better-than-expected earnings.
For the month, the Dow Jones Industrial Average rose 2.80 percent, the Standard & Poor’s 500 Index climbed 3.56 percent and the NASDAQ Composite jumped 6.60 percent.1
The month begin on a charged note as stocks rose following a strong jobs report and indications that the Fed would keep rates steady, sending the S&P 500 to a near historic high, even as investors sent gold prices higher and government yields lower.
Stocks maintained their upward momentum through mid-July, encouraged by a positive start to the earnings season, an election victory by Japan’s ruling party (which fed the expectation of further stimulus) and hints at future monetary loosening in Great Britain.
With 63 percent of the companies in the S&P 500 having reported earnings as of July 29, 2016, 71 percent have reported earnings above the mean Wall Street estimate while 57 percent have reported sales above the mean estimate.2
Overall, the “blended” earnings decline is 3.8 percent for the second quarter 2016. (Blended earnings combine actual results for companies that have reported and estimated results for companies yet to report.)3
Stocks traded in a tight range in the latter part of the month, but settled out at the high end of the range, ending a good month on a positive note.
Nearly all of the S&P 500 sectors ended higher, with advances in Consumer Discretionary (+6.91 percent), Consumer Staples (+2.08 percent), Financials (+7.68 percent), Health Care (+7.66 percent), Industrials (+7.80 percent), Materials (+9.12 percent), Technology (+9.54 percent) and Utilities (+1.15 percent). Only Energy suffered losses, sliding 0.85 percent.4
Overcoming the fallout of the Brexit vote and discouraging economic news, the MSCI-EAFE Index added 3.09 percent for the month.4
Germany led all major European markets with a solid gain for the month. France also posted a strong rebound. The Netherlands, Spain, and Austria also turned in good performances in July.5
Pacific region stock markets were led by Hong Kong and and Australia. Japan also notched a solid gain for the month.6
Gross Domestic Product: Hopes that GDP growth would accelerate were dashed as the second-quarter’s GDP estimate expanded by just 1.2 percent, well short of the 2.6 percent increase expected. The first-quarter growth rate of 1.1 percent was also revised downward to 0.8 percent.7
Employment: Nonfarm payrolls exceeded economists’ forecast by over 100,000, adding 287,000 new jobs in June. The job spurt was the biggest monthly gain since last October. The unemployment rate, nevertheless, rose from 4.7 percent to 4.9 percent.8
Retail Sales: Retail sales posted a strong gain in June, rising 0.6 percent. For the first half of 2016, retail sales were higher by 3.1 percent compared to the same period last year.9
Industrial Production: In a sign that domestic manufacturing may be breaking out of its sluggishness, industrial output climbed 0.6 percent in June. This represents the biggest increase since July 2015.10
Housing: Housing starts rose 4.8 percent, driven by increases in the West and Northeast regions.11
Existing-home sales increased 1.1 percent, posting their strongest results in almost ten years. First-time buyers reached 33 percent of all sales as historically low mortgage rates helped make homes more affordable.12
Sales of new homes jumped 3.5 percent in June and rose by 10.1 percent in the first six months of 2016 compared with the same period last year.13
CPI: Inflation rose last month by 0.2 percent. While the headline number remains low, there are sectors that have seen sharper price increases, including shelter, medical care, transportation services and clothing.14
Durable Goods Orders: New orders for durable goods dropped sharply in June, sliding 4.0 percent. May’s initially reported decline of 2.3 percent was revised downward to 2.8 percent. These reports reflect the continued struggles of U.S. manufacturers with the lackluster economic growth overseas and a strong U.S. dollar.15
At the conclusion of its two-day meeting on July 27, the Federal Open Market Committee voted to leave the federal funds rate unchanged. The Fed did, however, leave open the possibility of a rate hike in September due to its assessment that the near-term risks to the economy had abated.
As reverberations of Brexit still ripple across global markets, policymakers and investors alike may turn their gaze toward Italy, specifically Italy’s banking sector.
By some estimates, as much as 17 percent of Italy’s bank loans are classified as nonperforming—ten times the level of the U.S. Among the publicly traded banks in the Eurozone, Italian banks account for nearly half of the bad loan total in that region.16
The concern is that Italy’s bank loan issue might evolve into a crisis in confidence that may destabilize the country’s financial system and potentially spill over into other EU countries.
While Italy may be the primary concern, the banks in Portugal and Spain also have loan issues and are being watched closely.
The level of support from the EU is uncertain, as Italy has been slow to address its problems, which have long predated the Brexit vote. European Central Bank President Mario Draghi did, however, indicate that he might support a public bailout of Italian banks under certain circumstances. With the post-Brexit pressure on banks, Italy’s banking problems will continue to be followed closely in the months ahead.
Percent of Americans who say they work out one or more times a week: 73%<17
Percent who admit they don’t work out regularly: 27% 17
Percent who say they don’t work out at all: 14% 17
Share of Americans who engage in sports, exercise or recreation on any given day: 20% 18
Share of Americans who watch TV on any given day: 80% 18
Average number of hours per day active Americans spend doing sports, exercise or recreation: 1.5 hours 18
Number of hours per day Americans spend watching TV: 3.5 18
Number one reason people say they don’t exercise: No time 19
Average monthly cost of a gym membership: $58 20
Amount of gym membership money that goes to waste from underutilization: $39 20
Percent of people with gym memberships that never use them: 67% 20
Amount you would have earned after 20 years of investing your gym membership in an account earning 6%: roughly $27,000 <21
Number of minutes of moderate aerobic activity adults age 19 to 64 should have every week: 15022
Most popular form of exercise in the world: Walking23
Second most popular: Running23
Third most popular: Cycling23
Percent of people worldwide who say walking is their main form of fitness: 70%23
Number of calories a 150 lb person burns in 15 minutes of running: 119 24
Of ballet: 65 24>
Of curling: 51 24
Of gardening: 51 24
Of driving a car: 17 24
Percent of Americans who say it’s important to get a physical every year: 92% 25
Percent who actually get a physical every year: 62%25
Number of Americans who diet each year: 45 million26
Amount spent on weight-loss products each year: $33 billion26
GDP of Panama: $87.2 billion27
Total number of Americans who practice yoga: 15 million28
Percent of yoga doers who are college graduates: 71%28
Percent increase on yoga product spending over the last 5 years: 87%28
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance.
The forecasts or forward-looking statements are based on assumptions, may not materialize and are subject to revision without notice.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial advisor for additional information.
Copyright 2016 FMG Suite.
1. The Wall Street Journal, July 31, 2016
2. FactSet “Earnings Insight,” July 29, 2016
3. Interactive Data Managed Solutions, May 31, 2016
4. MSCI.com, July 31, 2016
5. MSCI.com, July 31, 2016
6. MSCI.com, July 31, 2016
7. The Wall Street Journal, July 29, 2016
8. The Wall Street Journal, July 8, 2016
9. The Wall Street Journal, July 15, 2016
10. The Wall Street Journal, July 15, 2016
11. The Wall Street Journal, July 19, 2016
12. The Wall Street Journal, July 21, 2016
13. The Wall Street Journal, July 26, 2016
14. The Wall Street Journal, July 15, 2016
15. The Wall Street Journal, July 27, 2016
16. The Wall Street Journal, July 4, 2016
17. Shape.com, 2016
18. Bureau of Labor Statistics, 2015
19. ShapeFit.com, April 14, 2015
20. StatisticBrain.com December 1, 2015
21. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment of combinations of investments. Past performance does not guarantee future results. Actual results will vary.
22. NHS.uk, 2016
23. FitBit.com, 2015
24. CalorieLab.com, 2016
25. CNN.com, April 14, 2015
26. Livestrong.com, June 24, 2015
27. CIA World Factbook, 2016
28. StatisticBrain.com, August 1, 2015