Investment & Economic Talking points
- Composite PMI rose to 54.2 signaling continued strength here in the US. (Above 50 is expansion, below is contraction).
- Existing home sales fell slightly to 5.52k and new home sales were steady at 610k. More of the same, which at this point in the cycle should be considered just fine.
- Durable goods orders were up 6.5% – this is one of the leading indicators we track and this is a very good number.
- Q2 GDP came in at 2.6%, twice as fast as Q1. This is typical, as Q1 has a tendency to “lag” due to some informational and seasonal inefficiencies. Unfortunately, six of the past seven quarters were revised down, leaving the average growth since 2009 at 2.1%.
- The best news from the GDP report was that each part of business investment – equipment, construction and intellectual property – were all positive for the 2nd quarter in a row. According to First Trust, this signals greater business optimism and if sustained may lead to greater productivity and economic growth.
- Between tepid growth, and Washington’s inability to repeal any of the ACA tax or present ANY tax reform, wages are likely to remain stagnant. This may cause us to reevaluate our commodities and inflation thesis however we need more data before making any decisions.
Despite Amazons earnings miss last week this has been a strong earnings season so far. Our main concern coming into this earnings season was forward guidance but so far most companies are still relatively optimistic about the rest of the year.