Tomorrow’s June update of the Chicago Fed National Activity Index (CFNAI), scheduled for July 23, is anticipated to show a slight increase in the three-month average. This forecast, which suggests a figure of -0.12, slightly edges above May’s reading of -0.16, pointing to an economic growth rate that remains below the historical average for the US. According to guidelines from the Chicago Fed, only values lower than -0.70 indicate a greater likelihood of a recession. Based on the current estimate for June, CFNAI’s three-month average is expected to reveal a below-trend expansion, yet it remains comfortably above the threshold that signals the onset of a recession.
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Michael Hewson, chief market analyst at CMC Markets UK, believes that declining pricing in raw materials will likely postpone a Federal Reserve interest rate increase. He noted, “Given the weak commodity prices, a ripple-out disinflationary effect is probable, making it challenging for the Fed to contemplate a rate hike in such a weak economic context,” he explained in an interview with CNBC on Monday. On the contrary, St. Louis Fed President James Bullard expressed that there is “more than a 50% probability right now” that the central bank will increase the target rate during its monetary policy meeting scheduled for September 16-17.
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● Earnings disappointments weigh on US stocks…
● Redbook: US chain-store sales inch higher in the first half of July…
● Softer global growth takes a toll on commodity prices…
● China leading index up 1% in July…
● Bank of England concerned about inflation…
● Italy’s factory orders decline in May…
● Greek parliament set to vote on additional austerity measures.
In recent years, a significant trend in global capital markets has been the continued dominance of the US stock market as a performance leader. Measured by comparative returns across major asset classes, it has been a one-sided affair. This is encouraging news for investors who have maintained robust allocations in US equities over recent years, while it leaves others frustrated. Although the supremacy of US stocks is likely to eventually shift, current evidence does not indicate an impending change in leadership.
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● The Treasury market is anticipating a rate hike in September…
● The US dollar has risen to a five-week high…
● In contrast, gold has fallen to a five-year low…
● Overall, commodity prices remain weak…
● US stocks (S&P 500) temporarily traded above their all-time closing high on Monday…
The US economy faced challenges in the first half of 2015; however, growth appears to be accelerating. According to the Atlanta Fed’s GDPNow model, a 2.4% expansion (seasonally adjusted annual rate) is projected for the second quarter, based on data from the July 17 estimate. This marks a modest improvement and indicates a favorable rebound from the slight contraction in Q1. It remains uncertain whether this growth rate will sustain in the latter half of the year. Nevertheless, a comprehensive overview of economic indicators suggests a generally positive macroeconomic trend through June. This data strongly supports the idea that last month did not signal the beginning of a new recession.
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● US housing starts in June reached the highest level since 2007…
● Consumer inflation in the US increased by 0.3% in June, a slight decline from May…
● US consumer sentiment dipped slightly in July…
● Oil prices fell, while the US dollar increased in early Monday trading…
● Europe’s current account surplus contracted in May.
● A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan
By Ben Carlson
Summary via publisher (Bloomberg/Wiley)
This book sheds light on investing by demonstrating how a simplicity-oriented approach can yield better decisions. Financial markets are intricate systems, but they don’t necessitate complex strategies; in fact, such complexity often leads investors astray. While information is crucial, understanding and perspective play key roles in making informed decisions. The book offers insights into effectively viewing markets and portfolios, proposing straightforward strategies that simplify investing, thereby making it more rewarding, less confusing, and less time-consuming.
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The latest report on residential construction for June indicates a rebound in the housing market following a difficult winter. Housing starts totaled 1.174 million units in the previous month (seasonally adjusted annual rate), nearing a post-recession high. Additionally, newly issued building permits surged to their highest level in eight years, suggesting robust construction activity in the months to come. Unsurprisingly, home builders are feeling optimistic lately. According to the latest update from the National Association of Home Builders (NAHB), industry sentiment in July climbed to levels close to a ten-year high. In summary, the housing sector is poised to continue supporting the economy well into the future.
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● US jobless claims declined for the first time in a month…
● The Philly Fed index for July showed slower growth in manufacturing…
● While US home builder sentiment rose in July, it was near a ten-year high…
● Bloomberg’s consumer comfort benchmark remained largely unchanged last week…
● Fed Chair Yellen stated that she prefers to raise rates “in a prudent and gradual manner.”
