For the market week ended Friday, July 5, 2019
- US Equity Markets posted strong results last week, as the US and China agreed to restart trade talks and President Trump agreed not to impose additional tariffs on China at this time. As a result, the S&P 500 rallied to new highs again, up 1.7% for the week to bring its gains for the year up to 19.3%. The Nasdaq rose 1.9% for the week and is now up 23.0% for the year, while the Russell 2000 (small-cap stocks) increased 0.5% for the week to bring its gains for the year to 16.9%.
- Global equity markets increased, albeit less so, as easing trade hopes were somewhat offset by weak economic data out of both Europe and Asia. Investors were encouraged at the nomination of IMF Managing Director Christine Lagarde as the replacement for ECB President Mario Draghi, believing she will keep rates in Europe low. For the week, Developed Markets increased 0.5% and are now up 13.0% for the year. Emerging Markets were also up 0.5% and are now up 9.8% for the year.
- Strong US economic data last week reduced expectations that the Federal Reserve will cut interest rates as aggressively as some had hoped. Market expectations for a 0.50% reduction in rates at its July meeting declined to around 5% from roughly 32% the prior week. However, the market continues to believe there is a 100% chance of a 0.25% rate cut at its July meeting.
On Interest to Us...
- US employment-related data for June was "Goldilocks," suggesting fears of an economic slowdown may be overstated. Specifically, US Payroll gains for June increased a strong 224K, well above expectations; the three-month average monthly Payroll gains is now a very healthy 171K. At the same time, average annual wages increased by 3.1%, down from 3.2%, suggesting that wage-based inflation pressures may have eased. The Unemployment Rate for June did tick up to 3.7% from 3.6% in May, but that was because more people came into the labor force, which is healthy economically.