During July, the markets yet again continued their march to record territories. The Dow inched closer to 22,000, yet another psychological milestone. When, not if, this level is attained, it will mark the third 1,000-point milestone within a year. The Dow and other indices gained despite further doubts about the Trump administration’s ability to implement the promised pro-growth policies. As the second-longest bull market in history continues, it seems that few events can stop its momentum.
The market closed the month of July with mixed results. The Russell 2000 lost about .11% during the month, the S&P 500 finished the month with a 2.0% gain, the Dow had a 2.6% gain, and the Nasdaq finished the month with a 3.4% gain. The Dow, S&P, and Nasdaq have all risen in eight of the past nine months.
Significant domestic and international events could have provided catalysts for a market correction, but failed to make an impact. Turmoil in the administration and Senate questioning regarding possible Russian meddling in the Presidential election took front and center stage. The failure of the repeal of the Affordable Health Care Act accentuated the ineptitude of Washington and confirmed doubts of any progress for the remainder of the year. North Korea remained as defiant as ever, and Russian sanctions went into effect.
All S&P sectors except for Consumer Staples and Health Care gained during the month. The top performers for the month were Energy with a gain of 3.07%, followed by Technology at 2.99%, and MateIARls at 1.64%. The laggards were Consumer Staples and Health Care, which each lost about .15%, and Real Estate, which eked out just a .28% gain. For the year to date, Technology remains the leader, with close to a 19% gain, followed by Health Care with a 16% gain, and Consumer Discretionary with a 12% gain. Energy is the only sector in the red, with nearly a 12% loss year to date.
The yield on the 10-year Treasury fell 0.6% in July, its largest slide since May. Low inflation and questions regarding economic growth have dulled the allure of the safe-haven instrument. Further interest rate hikes this year now seem doubtful.
Oil finally ended the month above $50 a barrel, its largest close since May 24th. For the month, it rose 9%. The rise was due to the possibility of supply shortages resulting from the combination of declining US inventories, renewed production curb promises from OPEC members, and the possibility of sanctions against Venezuela.
Economic indicators generally showed positive results in July. The Chicago PMI for July slipped to 58.9 from a three year high of 65.7 in June, breaking a string of five consecutive increases. However, any reading above 50 indicates improving conditions. Meanwhile, the unemployment rate remains near a 16 year low of 4.4%. Companies continued strong hiring in July, with 40% of companies raising pay between 1-2% to attract or retain employees. The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in June on a seasonally adjusted basis. Over the last 12 months, the all-items index rose 1.6 percent.
It seems that this bull market is getting long in the tooth. Washington’s inability to get anything done raises warning flags for September, as the debt ceiling approaches and a budget needs to be crafted. International tensions mount as North Korea continues to push boundaries by launching further-ranging missiles. Nonetheless, we are cautiously optimistic that the markets will continue to provide growth for the long-term horizon investor.