Weekly Economic Update 07/16/2018

INFLATION NEARS 3%

The federal government’s Consumer Price Index rose 2.9% across the 12 months ending in June, a level of annualized inflation last seen in February 2012. Yearly inflation has now increased for five straight months (although the headline CPI went north only 0.1% last month). The core CPI, which removes food and fuel costs, rose 0.2% in June, bringing its 12-month gain to 2.3%. Over the past 12 months, the cost of fuel oil climbed 30.8%; the cost of gasoline, 24.3%. Feeling the effect of those advances, the Producer Price Index rose 3.4% in the year ending in June.1,2

UNIVERSITY OF MICHIGAN CONSUMER SENTIMENT GAUGE DECLINES

At a mark of 97.1, the preliminary July edition of this consumer sentiment index came in 1.1 points underneath its final June reading. Still, it was close to its average reading over the past year (97.7). One year ago, the index stood at 93.4. Thirty-eight percent of consumers felt tariffs would negatively affect the economy, an increase from 21% in June and 15% in May.3

GOLD FALLS TO A 12-MONTH LOW

With a strengthening dollar providing a stiff headwind for the metals market, it was unsurprising that the key precious and base metals (gold, silver, copper, palladium, platinum) all retreated last week. Gold suffered the least, declining 1.2% to a Friday settlement of $1,241.20, its lowest COMEX close since July 17, 2017.4

DOW CLIMBS BACK ABOVE 25,000

Finishing Friday’s trading session at 25,019.41, the blue chips rose 2.30% for the week, and outperformed the Nasdaq Composite and the S&P 500 over five days. The Nasdaq gained 1.79% to close out the week at 7,825.98, while the S&P advanced 1.50% to end the week at 2,801.31.5

THIS WEEK

  • Earnings take center stage: Bank of America, BlackRock, J.B. Hunt, and Netflix lead the way on Monday, when investors will also consider June retail sales figures.
  • Federal Reserve chair Jerome Powell begins two days of testimony before Congress on monetary policy on Tuesday; on the earnings front, Charles Schwab, Comerica, CSX, Fidelity National, Goldman Sachs, Johnson & Johnson, and UnitedHealth all announce.
  • Wednesday, earnings news rolls in from Abbott Labs, Alcoa, American Express, eBay, Grainger, IBM, Morgan Stanley, Northern Trust, Novartis, and U.S. Bancorp, and complementing all this, analysts consider June housing starts and building permits and a new Fed Beige Book.
  • On Thursday, BoNY Mellon, BB&T, Blackstone Group, Capital One, Celanese, Cintas, Dominos, E*TRADE, Fifth Third, GATX, KeyCorp, Microsoft, Nucor, Philip Morris, Snap-On, Sonoco, Travelers Companies, Unilever, and Union Pacific present earnings, and a new initial jobless claims report arrives.
  • Friday, earnings appear from Baker Hughes, General Electric, Honeywell International, Manpower, Regions Financial, Schlumberger, Stanley Black & Decker, State Street, and SunTrust Bank.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA 1.21 16.08 12.36 12.63
NASDAQ 13.36 24.73 23.48 25.37
S&P 500 4.78 14.44 13.35 12.81
REAL YIELD 7/13 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.72 0.58 0.55 1.43

Sources: wsj.com, bigcharts.com, treasury.gov – 7/13/18 5,6,7,8
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.


WEEKLY TIP

There are multiple reasons why you should avoid taking a loan from your workplace retirement plan.

One excellent argument against this move: you will deprive the funds you borrow of compounding power.


This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:
1 – tradingeconomics.com/united-states/inflation-cpi
2 – investing.com/economic-calendar/
3 – sca.isr.umich.edu/
4 – marketwatch.com/story/gold-retreats-on-track-for-lowest-settlement-in-a-nearly-a-year-2018-07-13
5 – markets.wsj.com/us
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F13%2F17&x=0&y=0
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F13%2F17&x=0&y=0
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F13%2F17&x=0&y=0
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F12%2F13&x=0&y=0
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F12%2F13&x=0&y=0
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F12%2F13&x=0&y=0
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F14%2F08&x=0&y=0
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F14%2F08&x=0&y=0
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F14%2F08&x=0&y=0
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll