Your Weekly Update for Monday, July 17, 2023.
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Mike Elerath
CERTIFIED FINANCIAL PLANNERTM
CERTIFIED IN LONG-TERM CARE
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Bill Roller
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CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
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Summary
Markets rose last week. The Dow Jones Industrial Average rose 2.29% to 34,509.03 while the S&P500 ended up 2.92% to 4,505.42. The Nasdaq Composite rose 3.32% to 14,113.70. The annual yield on the 30-year Treasury fell 11.1 basis point(s) to 3.923%.
Economic data for the week included producer and consumer price inflation continuing to decelerateāand even more so than expectations. Consumer sentiment also improved to the highest point in several years.
Global equities gained last week on the back of the improving U.S. inflation data. Bonds also gained along with the retreat in interest rates. Commodities rose with help from a weaker dollar.
Economic Notes
(+) The Producer Price Index for June ticked up 0.1%, below the 0.2% gain expected. The divergence between economic sectors continued, with producer goods prices unchanged, and services up 0.2%. Energy prices rose 0.7%, while food prices fell by -0.1%. Year-over-year, headline PPI decelerated to a barely-positive 0.1%, while core PPI (ex-food, energy, and trade) fell to 2.6%. Within those figures, goods PPI declined by -4.4%, offset partially by services prices up 2.3%, resulting in the total flattish figure. However, those comparatives are largely due to large rises in prices during the start of the Ukraine-Russia conflict last year.
(+) The Consumer Price Index continued to improve for June, with headline and core (ex-food and energy) CPI each rising just under 0.2%, a tenth lower than expectations. In fact, the core number was the lowest in over two years. On the headline side, food prices rose a tenth, while energy commodities gained 0.8%. Within core, rents gained another 0.5%, showing a stickiness and lack of flow-through (yet) from weaker rent data seen in other reports, and apparel gained 0.3%. Airline fares fell by a dramatic -8% in the month, while used car prices fell -0.5%, offsetting rises in car insurance and maintenance (where parts are still being hampered by supply shortages).
Year-over-year, headline and core CPI decelerated to 3.0% and 4.8%, respectively, which represented a substantial deceleration. As with PPI, this was largely due to a favorable comparative vs. the high point a year ago. (This means that trailing 12-month CPI may turn upward again in a few months.) Nevertheless, it pleased financial markets, as it lowered the potential of several further rate hikes (or at least beyond late July perhaps). While energy prices (like gasoline) falling over -28% on the year helped the headline figure, other segments have contributed to a greater degree recently, such a drop in used car prices and airline fares. As CPI is calculated in a myriad ways, āall items less shelterā from June to June is only up 0.7%, while āall items less food and shelterā takes the past year into -0.6% deflation oddly enough. This trend has been occurring globally, in both developed and emerging economies, although core prices are taking far longer to normalize.
(+) Import prices in June fell -0.2% overall, and -0.3% on an ex-petroleum basis, each down a tenth further than forecast. Prices fell broadly, with the largest drops in industrial supplies, food/beverages, and consumer goods ex-autos. This āimportedā inflation decline was generally in keeping with disinflation elsewhere, and remains good news.
(+) The preliminary July Univ. of Michigan index of consumer sentiment rose a sharp 8.2 points to 72.6, well above the 65.5 expected, to the highest level in nearly two years. Assessments of both current conditions as well as future expectations saw gains of similar magnitude. Inflation expectations for the coming year rose a tenth to 3.4%, contrary to expectations of a decline; those for the next 5-10 years also ticked up a tenth to 3.1%. Underlying commentary pointed to broad-based improvement in consumer moods across mid- to higher-income groups, due to improved inflation numbers and an ongoing decent labor market.
(0) Initial jobless claims for the Jul. 8 ending week fell by -12k to 237k, below the 250k median forecast. Continuing claims for the Jul. 1 week rose by 11k to 1.729 mil., a bit above the 1.720 mil. expected. The offset points to little net change in conditions, with unusual distortions continuing in the data, including potential fraud in OH and MN (with 26k in new claims in the two states alone).
Market Notes
| Period ending 7/14/2023Ā | 1 Week %Ā | YTD %Ā |
| DJIA | 2.29 | 5.30 |
| S&P 500 | 2.44 | 18.41 |
| NASDAQ | 3.32 | 35.47 |
| Russell 2000 | 3.58 | 10.55 |
| MSCI-EAFE | 4.87 | 14.71 |
| MSCI-EM | 4.95 | 9.38 |
| Bloomberg U.S. Aggregate | 1.51 | 2.29 |
| U.S. Treasury YieldsĀ | 3 Mo.Ā | 2 Yr.Ā | 5 Yr.Ā | 10 Yr.Ā | 30 Yr.Ā |
| 12/31/2022 | 4.42 | 4.41 | 3.99 | 3.88 | 3.97 |
| 7/7/2023 | 5.46 | 4.94 | 4.35 | 4.06 | 4.05 |
| 7/14/2023 | 5.49 | 4.74 | 4.04 | 3.83 | 3.93 |
In the midst of slower summer volume, U.S. stocks gained last week, as falling consumer and producer inflation boosted investor spirits. The key factor, of course, is the impact on the economy, as well as the lower probability of the Fedās continued hawkish rate hike path. Every sector ended in the positive last week, with communications and consumer discretionary leading the way, and energy and consumer staples coming up in the rear, with lesser gains. Real estate fared positively, up nearly 3%, as interest rates fell back. Earnings season began Friday, with several large banks showing mixed results for the quarter.
The NASDAQ announced a āspecial rebalanceā of the tech- and communications-heavy NASDAQ 100 index, due to the largest seven companies representing over 50% of the indexās market cap. This is only the third time for such an event, with the prior two in 1998 and 2011. This is set to take place July 24, to ācapā largest holdings at certain percentage level, and dispersing percentages throughout the rest of the index. Specifically, per their index methodology, stocks comprising 4.5% of the index can be capped so that the group remains at or below 48% of the total index. This preserves diversification in the index, and also, from a practical standpoint for ETFs that track that index (such as QQQ), helps avoid regulatory problems with over-concentration. Despite its common usage, the NASDAQ 100 has never been a complete solution as a diversified U.S. stock market index. In fact, per Morningstar, 51% of the index is dedicated to information technology alone, with nearly 85% being related to tech, communications, and consumer discretionary stocksāa significant āgrowthā tilt to say the least.
Foreign stocks outperformed U.S. on the week, with strength in Europe offset by weaker Japan results. A -2% decline in the U.S. dollar was helpful in U.S.-investor terms. In emerging markets, stocks in China, Korea, and Taiwan all saw strong weeks, helped by a variety of Chinese support measures aimed at stemming damage from the property sector, which could be holding back consumers.
Bond prices gained last week, as interest rates declined, along with lower CPI and PPI readings, with the lowered expectations for the tight Fed policy. High yield slightly outperformed other investment-grade groups. Foreign bonds gained several percent in developed and emerging markets, helped by the dollarās decline.
Commodities rose across the board, helped by the drop in the dollar. Industrial metals and precious metals were each up over 4%. Crude oil prices rose 2% last week to over $75/barrel.
Mortgage Rates
āMortgage rates increased to their highest level since November 2022, the last time rates broke seven percent,ā said Sam Khater, Freddie Macās Chief Economist. āIncoming data suggest that inflation is softening, falling to its lowest annual rate in more than two years. However, increases in housing costs, which account for a large share of inflation, remain stubbornly high, mainly due to low inventory relative to demand.ā
The 30-year fixed-rate mortgageĀ averaged 6.96 percent as of July 13, 2023, up from last week when it averaged 6.81 percent. A year ago at this time, the 30-year FRM averaged 5.51 percent.
The 15-year fixed-rate mortgageĀ averaged 6.30 percent, up from last week when it averaged 6.24 percent. A year ago at this time, the 15-year FRM averaged 4.67 percent.
Freddie Macās Primary Mortgage Market SurveyĀ® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Prestige Mortgage Services Inc. dba Prestige Home Mortgage (NMLS#14216) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | 30103.43 | -0.70% | -0.40% | $584,796,836,219 | $9,728,765,260 |
| ETH | Ethereum | 1906.4 | -1.38% | 2.21% | $229,113,604,598 | $5,071,532,380 |
| XRP | XRP | 0.7337 | -1.74% | 55.41% | $38,553,607,062 | $3,468,120,660 |
| BNB | BNB | 243.07 | -2.82% | 0.40% | $37,883,359,482 | $627,150,022 |
| ADA | Cardano | 0.3102 | -3.75% | 8.49% | $10,859,390,474 | $284,927,246 |
| SOL | Solana | 26.67 | -5.13% | 27.79% | $10,759,801,542 | $770,251,367 |
| DOGE | Dogecoin | 0.06894 | -3.64% | 6.47% | $9,672,293,311 | $459,356,799 |
| MATIC | Polygon | 0.764 | -3.40% | 10.97% | $7,125,523,390 | $335,863,441 |
| TRX | TRON | 0.07924 | -1.08% | 2.67% | $7,118,883,250 | $153,794,391 |
| LTC | Litecoin | 90.54 | -4.35% | -4.64% | $6,652,159,728 | $542,014,137 |
| DOT | Polkadot | 5.22 | -3.01% | 2.67% | $6,413,021,616 | $128,454,444 |
| AVAX | Avalanche | 14.03 | -3.91% | 4.85% | $4,852,709,451 | $134,272,982 |
| WBTC | Wrapped Bitcoin | 30139.88 | -0.60% | -1.52% | $4,761,340,348 | $76,879,421 |
| BCH | Bitcoin Cash | 243.52 | -3.86% | -9.52% | $4,736,694,536 | $324,081,744 |
| TON | Toncoin | 1.35 | -0.28% | -1.76% | $4,635,497,157 | $6,406,867 |
| SHIB | Shiba Inu | 7.763E-06 | -3.55% | 2.71% | $4,575,088,018 | $115,153,609 |
Information current as of 5:35 AM PDT, Monday, July 17, 2023. Source: https://coinmarketcap.com
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Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Marketfield Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poorās, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.