The Markets (as of market close July 29, 2016)

GDP growth rate for the second quarter, earnings reports from some key companies, as well as the large cap market indexes all cooled off last week.  The tech-based NASDAQ and the small-cap Russell 2000 each posted weekly gains, with the NASDAQ leading the way among the major indexes. Treasury yields fell likely influenced by falling oil prices. Abroad, the Eurozone seems to be recovering from the initial shock caused by the Brexit vote, as the second-quarter GDP expanded at a modest 1.2% (the same as the U.S. GDP), which is ahead of the first-quarter pace. Crude oil (WTI) prices continue to fall, closing at $41.38 a barrel last week, down from $44.21 per barrel the previous week.

Last Week’s Headlines

  • The GDP grew at a 1.2% annualized rate in the second quarter. On the plus side, consumer spending expanded at a rate of 4.2%–the highest growth rate since 2014. The drawback to overall economic growth is on the business side of the GDP, which saw businesses scale back inventories and business investment.
  • Following its July meeting, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at 0.25%-0.50%. The Committee does not meet again until mid-September.
  • The housing market continues to expand as new home sales increased by 3.5% in June over the prior month. The median sales price of new houses sold in June 2016 was $306,700; the average sales price was $358,200.
  • The United States trade deficit for June grew by $2.2 billion (3.7%) over May. Exports of goods were $120.2 billion, while imports were $183.5 billion, for a net trade deficit of $63.3 billion.

Eye on the Week Ahead

This summer has been good for equities markets and most economic indicators. Two important reports are issued next week: personal income and outlays, and the employment situation. Personal income and outlays, offers information on consumer income, savings, and spending, which can offer a glimpse into the strength of the economy from the consumer’s perspective. June’s jobs report was encouraging following May’s disappointing information. This report often has a direct impact on the U.S. stock markets as Wall Street tends to pay particular attention to several pieces of information from this report, including the unemployment rate, the number of new jobs added, and wage information. We are striving to stay within the particular BWFA investment model for each client with an eye toward utilizing cash reserves into investment allocations that take advantage of the current market and economic strength.