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MCF Weekly Capital Market Review - July 1st, 2019

After touching an all-time high only two weeks prior, markets were flat to slightly positive last week. Despite the lackluster week, the Dow Jones Industrial Average posted its best June month since 1938 at 7.2% and the S&P 500 posted its best first half of the year since 1997 at 17.3%[1].

Fed chair Powell’s speech on Tuesday seemed to temper expectations of monetary easing. Although the Fed will “act as appropriate to sustain the expansion,” the Fed wants to ensure it is not overreacting to short-term sentiment[2]. The rhetoric suggests that the Fed would like to see continued evidence of a slowdown and for a time period that is beyond “short-term sentiment” before cutting rates.

Geo-political developments from last weekend’s G20 summit provide an auspicious backstop against a sustained slowdown. Trump announced Saturday no further increases on existing China tariffs and revoked a ban that prevented US tech companies from selling products to Chinese tech manufacturer Huawei. So far, Trump is touting in return a Chinese commitment to purchase “large amounts” US agricultural product. Negotiations will continue, likely dragged out; Trump mentions “quality of transaction is far more important to me than speed”[3]. However, it is still a positive development and the optimistic “temporary truce” outcome mentioned from our 6/17/19 commentary.

Consumer confidence took another hit due to pre-G20 trade war concerns and weakening employment data. Durable Goods Orders were a mixed bag and the Q1 GDP estimate held steady at 3.1%. Positive surprises included Corporate Profits, Pending Home Sales, and Personal Income and Outlays[4]

This week’s releases will focus on manufacturing and employment. The PMI and ISM Manufacturing Indices, Construction Spending, and Factory Orders may provide some hints of future demand. Indications of stronger labor markets and wage inflation from the ADP Employment Report, Employment Situation, and Jobless Claims may provide some counterbalance to the Fed’s dovish pivot from its last meeting. On the other hand, weaker-than-expected reports on manufacturing and employment would lend support to the argument for monetary easing before the end of the year.

[4] https://us.econoday.com/


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  MCF is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are a MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Please click here to review our full disclosure.


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