Economic Data and Market Highlights
Global stocks fell 89 basis points during the week as indicated by the MSCI ACWI with declines mostly due to a 3.78% drop in Japan and a slight drop in US names. Stocks in Germany and the UK both rose and stemmed losses rising 1.07% and 1.15% respectively. Global bonds rose 25 basis points.
Within the US, Value names were key drivers to positive performance with the Russell 1000 Value rising 1.23%. With Q2 earnings underway, some investors are beginning to worry about the resiliency of AI. Russell 1000 Growth names fell 2.37% and the NASDAQ 100 fell 2.55%. While profits are still expanding at a relatively strong pace, Alphabets poor earnings results spurred broader concern about the time it will take for the massive investments some of the largest companies in the world have made in AI to pay off. In response, the Nasdaq slid -2.55% in its third week of losses while other consumer-focused companies such as Southwest Airlines, United Parcel Service Inc, and Whirlpool’s poor earnings and guidance stoked concerns about the resiliency of consumers. Next week, earnings from Meta, Microsoft, Amazon, and Apple will be looked at by the market for guidance around the viability of AI investments in the short term.
Small cap companies have been under pressure as rates have remained high, but in the last few weeks a reversal has taken place. On a quarter- to- date basis, the Russell 2000 is up 12.34% with value names outpacing growth, 12.39% versus 8.51%.
With interest rates sitting at a multi-decade high, the central bank has been able to take some energy out of the US economy, and the effects are starting to be seen at a granular level. Credit defaults are rising for car loans and credit cards, it’s taking longer to find a job, and the US unemployment rate has been slowly increasing. US treasuries in aggregate, advanced 30 basis points for the week.
The housing market has also been impacted, with home affordability at its lowest level in over 30 years. An average 30-year mortgage according to Bankrate is 6.58% as of this writing with a median-priced monthly mortgage payment sitting at $2,291 as of May, nearly double what it was three years prior. Sales have declined, but homeowners who locked in low rates are extremely reluctant to put their homes on the market with interest rates at this level, further impacting home supply.
Personal savings has also continued to decline, with June’s result hitting its lowest point, 3.4% since December of 2022.
While savings has declined and delinquencies have increased, consumer spending continues to increase. Note that June’s result of 0.2% was revised upwards to 0.4%.
As President Biden dropped from the race on Sunday, July 21st, there was some uncertainly as to who the new candidate from the Democratic party would be but support coalesced around Vice President Kamal Harris as the week unfolded.
Former President Trump spoke at the Bitcoin conference later in the week seemingly changing direction since his presidency and noted that should he win, the US Government would create a reserve of bitcoin. The asset rose 1.01% as of Friday. Bitcoin has risen 61.72% on a year-to-date basis.
This week, the SEC granted 10 applicants permission to issue a spot Ethereum ETF, the second largest crypto asset. It should be noted these ETFs, like the bitcoin spot ETF, trade during traditional market hours, but trading in the asset itself, like all others in the crypto space do not have a market open or close and trade 24/7.
The Past Week’s notable US data points
The Upcoming Week’s notable US data points
Data Source: Blackrock, Bloomberg, Charles Schwab, CNBC, Goldman Sachs, J.P. Morgan, Morningstar, MarketWatch, Standard & Poor’s, and the Wall Street Journal.
Authors:
Jon Chesshire, Managing Director, Head of Research
Michael McNamara, Analyst
Sam Morris, Analyst