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MARKET RECAP

• Markets were on fire, US stocks +3.9%, NASDAQ +5.3%, VXUS +3.51%, and bonds +0.51%.
• Fears of a recession were declining this week. Goldman Sachs cuts recession risk in the next year to 20% from 25%. Retail sales were up a strong 1%, jobless claims were falling, and economic data such as restaurant bookings, hotel occupancy, and air travel appeared fine.
• But homebuilders started on fewer projects than what was projected.
• Inflation news was good; wholesale prices were lower than expected, and the CPI, up 2.9%, showed inflation is slowing.

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MARKET RECAP

• US stocks ended up flat on the week, an incredible achievement considering the Monday scare.
• On Monday, the Japanese Topix fell by 12.2%, its biggest loss since October of 1987. Nasdaq fell by 3.4%, the S&P 500 -3.0%. The unwinding of the carry trade and scares of a hard landing propelled the selloff.
• The VIX got as high as the mid 60s and was at its highest level since the 2020 Covid bear market.
• There were economic fears that the Fed was way behind the curve. But the Institute of Supply Management’s service index offered some encouragement, rising to 51.4 from 48.8 in June. More positive news later in the week: Initial jobless claims came in at 233,000, a decline of 17,000 and lower than the estimate, helped calm the market.

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MARKET RECAP

• US stocks were down by 2.52% for the week, international stocks by 2.72%, bonds had a monster rally, up by 2.36%.. The Russell 2000 was down by 6.7%. The Dow fell 600 points on Friday. The NASDAQ is now down just over 10% from its  July 10th high and is in correction territory. The 10-year yield fell more this week than any time since March of 2020.
• There was a sharp slowdown in jobs in July, up by 114,000, falling short of the expectations of 170,000. The unemployment rate increased to 4.3%, a three-year high. Average hourly earnings were up by 3.6% yearly, the lowest gain since May of 2021.
• The VIX closed at its highest level of the year.
• The Sahm Rule was triggered, an early recessionary indicator.
• 
• But hard economic data still points to more of a soft landing than a hard one. According to Torsten Slok, Chief Economist at Apollo, “There are no signs of a slowdown in restaurant bookings, TSA air travel data, tax withholdings, retail sales, hotel demand, bank lending, Broadway show attendance, and weekly box office grosses. Combined with GDP in the second quarter coming in at 2.8%, the bottom line is that the current state of the economy can be described as slowing, but still a soft landing.”

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MARKET RECAP

• Stocks ended the week on a high note but are down for the week. US stocks fell by 0.51%, and international stocks by 0.20%. However, the Dow Jones Industrial Average finished up 0.75%. The S&P Small Cap 600 was up by 3.6% for the week. Bonds rallied by 0.28%.
• Good inflation data helped small caps and the Dow. The personal consumption expenditures price index was up only 2.5%, and in the second quarter, GDP came in better than expected at 2.8%. To investors, this was the right mix to suggest a rate cut in September.
• The NASDAQ was down by 2.1% for the week. On Wednesday, the index fell by 3.6%, its worst day since 2022. At its low point on Thursday, the MAG 7 was off by 14% from its high on July 11th.
• On Thursday, copper ended its longest losing streak since February of 2020.

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MARKET RECAP

• US stocks decline by 1.66% and international stocks by 2.64%. US small caps increased by 1.7%. The NASDAQ was off by 3.65%.
• On Wednesday, the Nasdaq had its worst day in two years due to fears of tighter regulation on chip sales to Congress.
• Fears of a trade war weighed on the market as the week progressed, courtesy of the Trump/Vance platform.
• On Friday, a worldwide software failure impacted businesses almost everywhere due to one line of bad code written by Crowdstrike.

TRUMP

Trump had a chance to make a positive statement at the Republican National Convention. Just a few days after the assassination attempt, with most of the entire country ready to give him a chance, he could have made an honest attempt to broaden his coalition and act like he wanted to unite the country. But just like you would think, he opened up his speech with most of the right notes, but it quickly deteriorated into a rambling, hateful, attack-filled, dark diatribe about Democrats and the current state of the world and the country. Of which, of course, only he could solve, often in as little as a day or two, and simply with a phone call. Trump is crazy, and while the Republican convention-goers swallow it up hook, line, and sinker, most of the rest of the nation realizes he is as bad as ever.

He delivered the longest presidential nomination acceptance speech on record; almost all of it was rambling and off the cuff. Trump is mad at the world and paranoid, believing that he has magical powers to solve problems immediately and that only he can do this.

Even with that, he leads in the polls because Biden appeared frail and unable to continue as President. Today (Sunday), Biden announced that he will withdraw from the race, so the Dems have a chance to rally now and can win if they nominate the right person. Kamila Harris appears to be that nominee, and I would not consider her the right person.

Trump is a weak candidate. And I say this knowing full and well that the Republicans left the convention all fired up and confident in what was a high-energy and well-run event, sure that they will win in November.

But as described above, Trump is still Trump, and he is not mentally well, and the voters in the middle understand that, and they will tilt the election, one way or the other. The big problem with the Democrats is that their policies, which seem to be driven by the far left, are so bad and so harmful for America and its culture that a lot of the middle will lean towards Trump despite his meanness, craziness, and mental instability.

If only there were a reasonable centrist candidate. But at least for now, there isn’t so that Americans will be faced with two bad choices. Let’s hope.

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MARKET RECAP

Here are the highlights for the financial markets for the business week ending July 12, 2024:

-There was an attempted assassination of Donald Trump. Fortunately, the former President survived. Hopefully, some good comes out of this, and we can move forward as a more civil society and respect opinions even when they differ from our own. That is what each party is now pledging.

– The Dow closed above 40,000 for the second time, buoyed by gains in various sectors. The index hit intraday record highs on Friday.

– **Bank Earnings**:
– Wells Fargo’s shares dropped over 5% following their quarterly results, while JPMorgan Chase remained stable, and Citigroup advanced. Analysts expect major banks to increase reserves to cover declining loans, impacting their earnings.

– The June Consumer Price Index (CPI) fell by 0.1%, marking the first monthly decrease in over four years, reinforcing expectations of an interest rate cut by the Federal Reserve in September.
– The market is now pricing three rate cuts by the end of January 2025.

– Jobless claims for the week ending July 6 decreased to 222,000, indicating a stable job market.

Overall, the week was marked by gains in major indexes, a shift in investor focus from large-cap tech stocks to smaller companies, and significant movements in bank stocks following earnings reports. Inflation data and expectations of Federal Reserve rate cuts played a crucial role in shaping market sentiment.

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MARKET RECAP

The NASDAQ and S&P 500 hit new highs. The NASDAQ was up 3.5% for the week and the S&P was 2% higher.

Unemployment increased to 4.1% and the US added 206,000 new jobs, a solid number. But the increase in the unemployment rate follows a recent trend of a slow grind higher. It was 3.4% one year ago. New jobs for April and May were revised lower by 111,000. Average hourly earnings increased by 3.9%, the lowest increase since 2021.

Investors are operating under the assumption that this all  means a comfortable slowing of the economy, and not what might be a tougher recession. They are also taking it to mean that the first rate cut might happen sooner rather than later, maybe in September.

Keir Starmer, leader of the UK Labour Party, will take over leadership of the country. But this is not the Labour Party of old, Starmer has led the party more towards the center, he is more of a pragmatist than a populist. His five point plan is to reduce regulation to increase housing, lower immigration, build-out green energy, and improve the health system. He is pro-business.

MARKET RECAP

• The S&P 500 was up 14% in the first half of the year led by Nvdia, +149%. NVDA accounted for 30% of the return. The market managed an increase despite the expectation of multiple interest rate cuts never happening. The rally was powered by excitement about AI. Meanwhile, the equal-weighted index was only up 4.1%.
• Nike fell 20% on Friday on a disappointing outlook.
• The market cap of S&P 500 companies increased by $6 trillion in the first half of this year, the biggest gain ever for the first half of a year.
• Personal-consumption expenditures index was up 2.6% in May compared to a year earlier, the lowest reading since 2021.
• Britain goes to the polls next week, and a pre-election poll shows that 65% of Brits say that leaving the EU was the wrong decision. Something we wrote about at the time. 15% said the benefits were greater than the costs. Goldman Sachs says that the British economy is 5% smaller now than it would have been had they stayed in the EU.

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