US stocks saw another month of steady gains in July driven by strong corporate earnings and positive, albeit slowing, economic numbers. Of the 195 S&P 500 companies to report earnings to date, 91% have beaten analyst forecasts. Economic news showed a still growing economy, but at a slower pace. Job growth accelerated in June with 850,000 new hires topping expectations for the largest gain in 10 months. The unemployment rate ticked up to 5.9% from 5.8%, but it was a result of more workers entering the workforce. Auto sales rose and the average sales price hit a record. Retail sales rose 0.6%, above expectations, and business activity expanded. Consumer confidence hit its highest level since the pandemic. Inflation remained high, gaining 5.4% in June, the highest year over year gain since 2008. Home prices continued to surge in June with median home prices reaching another record, up 23% from a year ago. GDP grew 6.5% in the second quarter exceeding its pre-pandemic size, but the rate of growth was below expectations.
Foreign stocks fell on concerns over the Delta variant and a China tech crackdown. The ECB left their benchmark interest rate unchanged after their meeting and said they would keep the benchmark rate at or below its current level until they see inflation stabilize around 2%. OPEC and Russia led oil producers agreed to restore all the cuts that were made to production during the pandemic. China’s economy grew 7.9% in the second quarter, in line with estimates, and the country had better than expected numbers on factory output, retail sales, and capital investment. However, China initiated a regulatory crackdown on Chinese internet and technology companies over improper antitrust and consumer protection practices during the month, which drove significant declines for China’s stock market. Emerging markets heavily trailed developed markets over July and the year to date as a result.
Bonds continued their rally in July as interest rates fell further. At the conclusion of the Fed’s July policy meeting, they said the economy has made progress towards their low unemployment and stable inflation goals and would “assess progress in coming meetings.” Many expect the Fed could start tapering their bond purchases later this year. The 10-year Treasury yield dropped further in July to settle at 1.24% compared with 1.45% to start the month and is down from 1.74% at the end of March. Treasury bonds led the way over the month, while Muni bonds were the top performer for the year to date. Longer term bonds topped shorter term bonds in July, but shorter term bonds have outpaced over 2021.
|Index Performance||July||Year to Date||Trl. 12 Months|
|US Stocks (Russell 3000)||1.69%||17.06%||38.73%|
|Foreign Stocks (FTSE AW ex US)||-1.52%||7.93%||29.09%|
|US Bond Mkt. (BBgBarc Int. Gov/Cred)||0.77%||-0.14%||0.27%|
|Municipal Bonds (BBgBarc 1-10 Yr Muni)||0.57%||0.88%||1.71%|
|Cash (ICE BofA ML 3-Mo T-Bill)||0.01%||0.03%||0.08%|