July Market Recap
Just when it felt like things couldn’t get any better for the stock market, July delivered even more to feel good about.
The Dow Jones Industrial Average was positive for 13 consecutive trading days (July 10-26), tying January 1987 for its second longest streak ever. The S&P 500 rose higher in each of the last three weeks. And the NASDAQ, along with the S&P, posted gains for the fifth month in a row.
Underpinning the latest chapter of this rally were strong corporate earnings, accelerating economic growth, and significant drops in inflation. The latest wave of financial news has some optimistic enough that you’re starting to hear “Goldilocks” being used when the talking heads describe current market conditions.
Time will tell whether it’s all sunshine and soft landings from here or if equities are merely pricing in a best-case scenario that fails to materialize. For now, it’s hard not to enjoy the ride.
For the second month in a row, all 11 sectors in the S&P 500 netted positive returns. Energy (+7.3%) and Communication Services (+6.7%) provided the biggest gains. Health Care (+0.9%) and Real Estate (+1.2%) finished on the opposite end of the spectrum.
Benchmark Returns: July 2023 | YTD 2023
+3.35% | +7.28%
+3.11% | +19.52%
+4.05% | +37.07%
The year-to-date gains are impressive, but the bounce from the market’s mid-October lows are even more remarkable. As of July 31, the S&P 500 had increased 31% from last fall’s low-water mark. The NASDAQ, which fell further on the way down, has recovered a staggering 42%.
Inflation was the story then and remains the biggest headline 9 ½ months later. The Consumer Price Index reported on July 13 showed year-over-year inflation of 3.0%, down from 4.0% a month earlier and its lowest level overall since March 2021. The NASDAQ rallied 3.3% the week of the CPI report, its largest weekly gain in four months.
Falling inflation has led to a spike in consumer confidence. The University of Michigan’s Consumer Sentiment index climbed 13% from a month earlier to its highest reading in nearly two years (September 2021).
The Federal Reserve raised interest rates by 0.25% on July 26. This was the 11th hike of this tightening cycle and came after a “pause” in June. The Fed Funds Rate sits at its highest level in 22 years, which is good for the yield on your money market account, but problematic if you happen to be house-hunting this summer.
Fed Chairman Jerome Powell was non-committal about potential future hikes, saying, “We will go meeting by meeting asking ourselves the same questions.” The Fed’s next meeting will occur in September.
Meaningfully lower inflation has been a treat for equity prices, but the cherry on top in July was the news that US GDP growth accelerated to 2.4% (annualized) in the second quarter. The numbers suggest faster growth than in the first three months of the year (2% annualized) and further reduce the chances of a near-term recession.
Small-cap stocks, as measured by the Russell 2000 index, gained 6.1% last month, outperforming large-caps for the second consecutive month. It’s a sign of broader participation in this rally. International equities offered mixed returns. Non-US Developed Markets rose 2.7%, but Emerging Market equities were up 6%.
Ten-year US Treasury yields eclipsed 4% for the fourth time this year before falling slightly and finishing the month at 3.96% (up slightly from 3.82% at the end of June).
West Texas Intermediate Crude oil climbed more than 16% to $82 per barrel, fueling Energy to its place as the S&P’s best-performing sector in July.
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
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Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
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