Market Commentary
US stocks continued to surge in July on fiscal stimulus hopes, better than expected corporate earnings, optimism over business reopenings, and positive economic news. Stocks gained despite climbing infection rates in many states. US Stocks posted their best four month percentage gain since December 1998. Negotiations in Washington are ongoing over another economic relief bill that would continue unemployment benefits for millions of Americans. With over 40% of S&P 500 companies reporting earnings to date they have posted a decline of 41%, but with 79% topping forecasts. Illustrating the massive and unprecedented impact of COVID-19, US GDP contracted at a 32.9% rate in the second quarter. However, there were positive economic signs during the month with the unemployment rate dropping to 11.1% in June and the economy adding 4.8 million jobs. New claims for unemployment insurance fell earlier in the month, but plateaued to end the month. US retail sales topped expectations again gaining 7.5% and US manufacturing activity began to grow. Sales of previously owned homes rose 20.7% in June, the biggest monthly gain on record, but remains 11.3% below from a year earlier. Gold ended the month at a new all time high of $1,963 a troy ounce.
Foreign stocks climbed over the month on improving economic numbers and additional fiscal stimulus. July saw improving manufacturing numbers in Europe and Asia. Eurozone retail sales topped expectations and German factory orders surged 10.4%. EU leaders reached an agreement on an $859 billion stimulus measure and the country bloc will issue its first ever common debt. The agreement now must be approved by the governments of each member country. China was the first major economy to post growth after the pandemic rising 3.2% in the second quarter. Emerging markets have outpaced developed markets for the month and the year to date.
Bonds continued to climb in July as interest rates ticked down. Interest rates eased over concern of the pace of the economic recovery and continued support from the Fed. The Fed concluded their July policy meeting saying they would continue to hold the Fed Funds rate near zero through at least 2022 and increase their holdings of Treasuries and other securities. They extended all their emergency lending programs by three months to the end of the year to help support the economy. The 10-year Treasury yield fell over the month ending at 0.54%, down from 0.66% to start July and down significantly from the start of the year. For the month, credit bonds were the top performers with longer term maturities outpacing short term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.
| Index Performance | July | YTD | Trl. 1 Yr. |
| US Stocks (Russell 3000) | 5.68% | 2.01% | 10.93% |
| Foreign Stocks (FTSE AW ex US) | 4.36% | -6.76% | 1.35% |
| US Bond Mkt. (BBgBarc Int. Gov/Cred) | 0.75% | 6.06% | 7.95% |
| Municipal Bonds (BBgBarc 1-10 Yr Muni) | 1.08% | 3.16% | 4.02% |
| Cash (ICE BofA ML 3-Mo T-Bill) | 0.02% | 0.50% | 1.30% |
There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated. Source: Morningstar, Inc.