U.S. stock indices posted gains for the month of August extending the rally experienced since November. Solid second quarter earnings helped propel the S&P 500, Dow Jones Industrial Average, Russell 1000, and Russell 3000 to all-time highs during the month. Large cap stocks, as measured by the S&P 500, have increased every month since the election. The S&P 500 increased +0.31% for the month, while small cap stocks, as measured by the Russell 2000, decreased -1.27%. Growth stocks gained +1.68% while Value stocks declined -1.26% during the month. International stocks outperformed their U.S. counterparts. Developed International stocks, as measured by the MSCI ACWI ex US Index, increased +0.56% and Emerging market stocks increased by +2.27% for the month.
Bonds rallied in August. Interest rates declined for the month, particularly for maturities 5 years and longer. The yield on the benchmark 10 year Treasury decreased 18 basis points to 2.12% during the month, which is the lowest level seen this year. Little news regarding monetary policy emerged from the Jackson Hole Economic Symposium. The Fed meets again on September 19-20 and at this point no change in rates is expected at this meeting. There are three more FOMC meetings scheduled this year and currently the Fed Funds futures market is suggesting there is less than a 50% chance of a rate hike at any of these meetings. The U.S. is expected to hit its $19.8 trillion statutory debt limit by the end of this month unless Congress agrees to raise the debt ceiling. The Barclays Aggregate Bond Index increased by +0.90% for the month. Treasuries gained +1.08% outpacing Investment Grade Corporates which increased by +0.78%. High Yield bonds decreased -0.04% and Municipals increased by +0.76%.
U.S. stocks again managed to record gains and continued their post-election rally. Growth stocks continued to outpace Value stocks and Large cap stocks outperformed Small cap stocks. International stocks, both developed and emerging, outpaced U.S. stocks for the month.
FIXED INCOME MARKETS
Rates decreased across the yield curve, particularly for maturities 5 years and longer. The yield on the 10-year Treasury decreased 18 basis points in August to 2.12%. The Barclays Aggregate Bond Index increased for the month as both Treasuries and Corporate bonds posted gains. High Yield bonds recorded a modest loss, while Municipal bonds increased in value for the month.
July economic data was decidedly mixed. On the positive side of the ledger, employment metrics looked solid. Over 200,000 new jobs were created, unemployment matched a 16-year low, and job openings hit an all-time high of 6.16 million. Wages, as measured by the Atlanta Fed’s Median Wage Tracker, grew at 3.3% in July, handily outpacing inflation and increasing the purchasing power of the consumer. Second quarter GDP was revised to +3%, the best growth since Q1 2015. On the negative side, both the ISM Manufacturing and Non-Manufacturing Surveys declined last month but still indicated an expanding economy. Inflation remains benign. Housing slowed across the board as starts, permits, and new and existing home sales all moderated from last month. The Jackson Hole Economic Symposium provided little in the way of new information, but rather suggested that current accommodative monetary policies will remain in force. The Fed’s next meeting is scheduled for September 19-20 and no change in rates is expected. Importantly, the U.S. is expected to reach its statutory debt ceiling at the end of September unless Congress agrees to increase the limit.
|Retail Sales ex Auto & Gas||July||0.4%||0.5%||-0.1%||0.3%|
|PPI MoM ex Food & Energy||July||0.2%||-0.1%||0.1%|
|PPI YoY ex Food & Energy||July||2.1%||1.8%||1.9%|
|CPI MoM ex Food & Energy||July||0.2%||0.1%||0.1%|
|CPI YoY ex Food & Energy||July||1.7%||1.7%||1.7%|
|New Home Sales||July||610,000||571,000||610,000||630,000|
|Existing Home Sales||July||5,550,000||5,440,000||5,520,000||5,510,000|
|Durable Goods Orders||July (P)||-6.0%||-6.8%||6.4%|
|S&P CoreLogic CS 20-City YoY||June||5.60%||5.65%||5.69%||5.74%|
|GDP Annualized QoQ||2Q (S)||2.7%||3.0%||2.6%|
|Univ. of Mich. Sentiment||Aug (F)||97.5||96.8||97.6|
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