Weekly Talking Points

  1. The S&P 500 ground out a positive 0.80% last week while the Dow Jones industrial Average was essentially flat (up 0.05%). International markets however took a breather as both developed (MSCI EAFE) and emerging (MSCI EM) declined 1.45% and 1.66% respectively.
  2. Personal income and personal consumption both rose 0.4% in June. Personal income is up 4.9%, and spending is up 5.1% yoy.  Both of these beat the average inflation numbers of around 2.2% very handily – the US consumer appears to be healthy at this point in the business cycle.
  3. The ISM Manufacturing index declined slightly to 58.1 in July (as a reminder levels above 50 signal expansion and below 50 contraction), which was below the 59.4 consensus. This will give the people who were raising concern about “trade wars” plenty of ammunition until the next report comes out.  However, I would caution that these reports can be volatile month-to-month and a 58.1 number is still very solidly in “expansion” territory.
  4. The ISM Non-Manufacturing index also declined in July to 55.7, well below consensus expectations of 58.6. Most concerning was the new orders index falling from 63.2 to 57.0.  The new orders index is one of the most important leading indicators we have for future economic output so this one bears important watching.
  5. The unemployment number on Friday was a mixed bag – the headline number of 157,000 jobs gained missed the expected number of 198,000, but after revisions to May and June the total net new jobs number came in at 216,000. All-in-all the unemployment rate is now down to 3.9% nationwide.  The U-6 unemployment rate, which is broader and includes “discouraged” workers and part-time workers looking for full time work dropped to 7.5%, the lowest since 2001.

Bottom Line

With economic data starting to come in more and more mixed, it is important to remind ourselves not to chase returns (what performed well the last twelve months) and focus on fundamentals.  There are still pockets of opportunity out there and in my opinion they may be beginning to shift – quality and dividend payers have been out of favor relative to growth for over a year and that tide may be beginning to turn.

Joel P. Faircloth, MBA
Chief Executive Officer, Aspen Wealth Strategies
Wealth Advisor, RJFS  

Opinions expressed author and are not necessarily those of Raymond James. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The MSCI EAFE Index is designed to represent the performance of large- and id-cap securities across 21 developed markets in Europe, Australasia and the Far East, excluding the U.S. and Canada. As of December 2017 it had more than 900 constituents and covered approximately 85% of the free float adjusted market capitalization in each country. MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indexes. The index’s three largest industries are materials, energy, and banks. Direct investment in any index is not available.

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