Your Weekly Update for Monday, July 29, 2024.
Beacon Rock Wealth Advisors is a dba of BR Capital, Inc. is a financial planning and registered investment advisory firm in Camas, Washington. We are always available to answer your finance questions. Give us a call at (800) 562-7096 or send an email to [email protected].
If you or someone you know is worried about retirement, send us an email or give us a call for a no-obligation Retirement and Social Security Analysis.
If this information is helpful to you, please forward this to a friend and ask them to subscribe at https://newsletters.beaconrwa.com/subscribe.
Have a great week!
Mike Elerath
CERTIFIED FINANCIAL PLANNERTM
CERTIFIED IN LONG-TERM CARE
[email protected]
Bill Roller
NMLS #107972
CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
Please give the video a âLikeâ and check out other videos and subscribe to the channel at https://www.youtube.com/@beaconrwa.
Summary
Markets were MIXED week. The Dow Jones Industrial Average was UP 0.75% to 40,589.34 while the S&P500 ended DOWN 0.83% to 5,459.10. The Nasdaq Composite FELL 2.08% to 17,357.81. The annual yield on the 30-year Treasury ROSE 0.6 basis point(s) to 4.456%.
Economic data for the week included 2nd quarter U.S. GDP ramping back up to above-trend levels, a mixed environment for recent durable goods orders, and declines in both existing and new home sales.
Equities were mixed last week, with gains in U.S. value and small cap, offset by declines in U.S. growth and internationally. Bonds gained along with falling yields, as inflation remained contained. Commodity prices fell across the board last week, led by energy and metals.
Economic Notes
(+) The advance estimate for U.S. GDP growth in the 2nd quarter came in at 2.8%, well above expectations of 2.0% and the 1.4% increase of Q1. (Though, the final Atlanta Fed GDPNow estimate for the quarter did peg it pretty closely at 2.6%.) Personal consumption re-accelerated to a growth rate of 2.3% (accounting for 1.6% of the 2.8% total). Interestingly, durable goods growth led the way, growing nearly 5% in a combination of different sectors, followed by smaller gains for services and nondurable goods. Gross private domestic investment rose over 8% (adding 1.5% to the total), led by transportation equipment more than structures, as well as a strong increase in inventories. Government investment grew 3% (adding 0.5% to the total), split between national defense and state/local growth contributions. Those areas of strength were offset by a drop in net exports, paring -0.7% from total growth.
For inflation, the GDP price index rose by 2.3% on a quarterly annualized basis in Q2, a sharp deceleration from 3.1% in Q1. Quarterly annualized PCE decreased from 3.4% in Q1 to 2.6% in Q2 on a headline basis, as well as on a core basis, ex-food and energy, from 3.7% to 2.9%. Both sets of measures continue to show decent progress on the inflation front. This report could be a mixed bag for the Federal Reserve, though, with slowing inflation pointing to an environment favoring rate cuts, while continued-strong economic growth is less supportive of easier monetary policy.
The initial Atlanta Fed GDPNow measure for Q3 has come out at the same 2.8%, 70% of which is from consumer spending, followed by nonresidential fixed investment and government spending. This is well above the Blue Chip economist consensus, which is running around 1.5-2.0% so far.
(-) The S&P Global U.S. manufacturing PMIÂ index fell by -2.1 points to 49.5, back into contraction, and below expectations for no change at 51.6. New orders fell by -4 points back into contraction, along with declines in output and employment. However, output prices fell by nearly -3 points to just above neutral.
(+) The S&P Global U.S. services PMI rose 0.7 of a point to 56.0, above the expected decline to 54.9, remaining in solid expansion. The new business indicator ticked up slightly to remain in expansion as well, while employment declined slightly, but remained expansionary. This is in contrast to slower ISM services readings as of late.
(+) Personal income rose 0.2% in June, well below the 0.4% expected, bringing the income gain to over 4% for the past 12 months. Personal spending rose 0.3% for the month, on par with expectations, resulting in a rise of 7% over the past yearâled by services more than goods. The personal saving rate ticked down to 3.4%, after downward revisions for the prior month. PCE inflation increased 0.1% on the headline side, and 0.2% for core, removing food and energy, each being close to expectations. Year-over-year, headline PCE was up 2.5% (down a tenth from the prior monthâs pace), while core PCE remained at 2.6%. The latter remains above the Fedâs 2.0% target level but has been moving in the right direction.
(-) Durable goods orders for June fell by -6.6%, in contrast to expectations of a 0.3% rise, resulting in the worst single-month headline result since the pandemic. However, that was overshadowed by the -127% decline in the extremely lumpy commercial aircraft category. Excluding that segment, orders rose by 0.5%, led by machinery orders up 2%, in addition to gains in electrical equipment and computer products. Core capital goods orders fared even better, up 1.0% in the month, while core capital goods shipments rose 0.1%.
(-) Existing home sales for June fell by -5.4% to a level of 3.89 mil. units, below expectations of a -3.2% decline. Single-family homes fell -5%, while condos/co-ops declined over -7%. Every national region experienced a decline, led by the Midwest (-8%) and South (-6%). Following a jump for the first few months of the year, sales have since reversed course downward. The median existing home sales price rose a bit for the month to a new all-time high of $426,900, representing a 4% rise over the past year. The inventory of unsold homes rose 3% on the month to the equivalent of 4.1 monthsâ supply, which is still quite tight. These stats continue to reflect the key underlying considerations of homeowners with low mortgage rates âstuck in place,â while the supply of new housing continues to underwhelm, keeping inventories generally low and prices continuing to appreciate. However, the National Association of Realtors (perennially bullish on real estate), noted some loosening on the edges, with some sellers receiving fewer offers and homes staying on the market a bit longer.
(-) New home sales fell by -0.6% in June to a seasonally-adjusted level of 617k units, in contrast to an expected increase of 3.1%. Sales levels remain -7% below those of a year ago. Regionally, the Midwest saw declines, while the West saw a small rise. The median new home sales price rose 2.5% on the month to $417,300, which amounted to a tiny decline over the past 12 months. (This was more due to home sizes shrinking rather than a weak market.) The inventory level came in up 0.2 for the month to 9.3 monthsâ supply, which is a significant increase compared to the 7.7 level a year ago. Absent a small spike in late 2020, new home sales remain at the lower end of the 600-800k band theyâve been in for the past five years and remain well below demographic and physical replacement needs.
(+) Initial jobless claims for the Jul. 20 ending week fell by -10k to 235k, just below the 238k median forecast. Continuing claims for the Ju1. 13 week fell by -9k to 1.851 mil., well below the expected increase to 1.868 mil. Initial claims rose by 8k in TX, while falling in several other larger states, pointing to the continued effects for several weeks from Hurricane Beryl in the Houston area. Otherwise, claims on a seasonally-adjusted basis have been steadily rising from lows in the 200k-ish level earlier this year, which represents the low end of the range seen during the past several years, but have stayed generally contained.
Market Notes
| Period ending 7/26/2024 | 1 Week % | YTD % |
| DJIA | 0.77 | 8.84 |
| S&P 500 | -0.82 | 15.35 |
| NASDAQ | -2.08 | 16.08 |
| Russell 2000 | 3.47 | 12.34 |
| MSCI-EAFE | -0.95 | 6.43 |
| MSCI-EM | -1.56 | 6.55 |
| Bloomberg U.S. Aggregate | 0.27 | 0.76 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2023 | 5.40 | 4.23 | 3.84 | 3.88 | 4.03 |
| 7/19/2024 | 5.43 | 4.49 | 4.16 | 4.25 | 4.45 |
| 7/26/2024 | 5.38 | 4.36 | 4.06 | 4.20 | 4.45 |
U.S. stocks were mixed again last week with âvalueâ ending in the positive, outperforming âgrowth,â which saw sharp declines. Small cap also ended several percentage points higher, continuing a stretch of recent rapid outperformance. By sector, utilities, health care, materials, and financials ended in the lead with gains of over 1%, while communications (Alphabet and Disney), consumer discretionary (Tesla and Starbucks), and technology lagged with declines of several percent. Real estate ticked slightly higher, as interest rates declined.
President Bidenâs decision to end his re-election bid didnât have an immediate impact but may have begun to play a subtle role as investors recalculated Trump vs. Harris election odds as well as began to digest policy differences. Mid-week, tech-related stocks pulled the market down for the worst single day in two years (-2.3%). Earnings calls for Alphabet and Tesla disappointed, raising concern for the entire group that has provided such an extreme degree of market leadership this year. In Alphabetâs case, it was less about earnings, but more about additional capital spending on artificial intelligence, which concerned markets. By Friday, the ânot worseâ PCE inflation number has turned sentiment again sharply positive. Interestingly, itâs possible that the âbad news is good newsâ has reverted back to a more normal narrative of âgood news is good news,â now that inflation has come under better control and the Fed appears to be on a concrete path of rate cuts by summerâs end.
The Magnificent 7 Group has already experienced more than a -10% correction, as opposed to the broader S&P 500, which is only down around -4% from peak. Even with strong fundamentals, such elevated valuations have left the high-flying technology segment of the market vulnerable to smaller disappointments that deviate from the expected narrative, as is usually the case. The higher the valuation, the less room for error from the standpoint of sentiment.
Per FactSet, with over 40% of S&P 500 companies reporting Q2 results, nearly 80% have announced a positive earnings surprise and 60% a positive revenue surprise. This has brought the quarterly blended (actual plus estimates) earnings growth rate up to 9.8%âup about a percent from expectations a few weeks ago. By sector, communications and technology continue to lead, despite the contrary market results over the past few weeks. Interestingly, despite some concerns about profit margins, these have also continued to improve by a few tenths, back up above 12%.
Foreign stocks fell back on net, with gains in Europe and the U.K. offset by a sharp decline in Japan, due to a stronger yen, which is expected to hamper exporters. Emerging markets also experienced declines, led downward by China, Mexico, Turkey, and Taiwan. Fears of global trade tensions, instigated by the U.S. tended to dampen sentiment.
The Bank of China cut interest rates by 0.10% in a surprise move, following their Third Plenum 5-year planning meeting, after which policymakers indicated a plan to increase government borrowing and spending to boost the economy, in addition to a focus on technology reliance. This wasnât a dramatic move but signaled more of an easing policy bias. Also, removed from the statement was some of the pro-market language seen in earlier Plenums, was removed, with the dangers of market failures noted. This could be a sign of additional government influence in market activities, but that remains an open question.
Bonds gained across the board, with yields falling. High yield outperformed investment-grade corporates and U.S. Treasuries, while floating rate bank loans fell back slightly along with the lower rates. Foreign bonds also fared positively, with little impact from the U.S. dollar for the week.
Commodities fell back across the board last week, led by declines in industrial metals and energy, although precious metals also fell back a bit. Crude oil prices fell -2% last week to $77/barrel, as drilling activity picked up and demand growth in China weighed on markets. Oil prices have fallen nearly -10% over the past few weeks, and copper is down -20% over the past two months due to some of these same demand concerns.
Mortgage Rates
âMortgage rates essentially remained flat from last week but have decreased nearly half a percent from their peak earlier this year,â said Sam Khater, Freddie Macâs Chief Economist. âDespite these lower rates, buyers continue to pause, as reflected in tumbling new and existing home sales data.â
The 30-year FRM averaged 6.78 percent as of July 25, 2024, up slightly from last week when it averaged 6.77 percent. A year ago at this time, the 30-year FRM averaged 6.81 percent.
The 15-year FRM averaged 6.07 percent, up from last week when it averaged 6.05 percent. A year ago at this time, the 15-year FRM averaged 6.11 percent.
For more information about Beacon Rock Wealth Advisors, check out our brochure here:Â https://beaconrwa.com/wp-content/uploads/2020/04/BeaconRockBrochure.pdf
Click on the image below to go to https://youtu.be/K3u5LBQQFFM to see the video from July 26 in which Mike Elerath, Bill Roller, and Keller Williams Realtor Michael Harding discuss the financial markets and Clark County real estate.
Freddie Macâs Primary Mortgage Market SurveyÂŽ 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 Mortgage Window, Inc. Â (NMLS#2485156) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | $69,506.00 | 2.32% | 2.88% | $1,371,469,774,483 | $24,266,093,230 |
| ETH | Ethereum | $3,377.00 | 3.37% | -3.57% | $405,846,722,041 | $12,217,622,040 |
| SOL | Solana | $191.43 | 3.44% | 6.40% | $88,960,771,192 | $2,686,430,860 |
| BNB | BNB | $592.35 | 1.99% | -1.07% | $86,404,652,783 | $1,621,697,586 |
| XRP | XRP | $0.61 | 0.92% | -0.08% | $34,107,310,984 | $928,919,603 |
| DOGE | Dogecoin | $0.13 | 2.28% | -3.35% | $19,397,702,926 | $816,568,727 |
| TON | Toncoin | $6.76 | 3.07% | -4.04% | $17,009,440,829 | $159,841,801 |
| ADA | Cardano | $0.42 | 1.75% | -4.42% | $15,035,883,161 | $260,324,982 |
| TRX | TRON | $0.14 | -0.99% | 1.22% | $11,837,796,568 | $304,235,629 |
| AVAX | Avalanche | $28.58 | 3.83% | -11.72% | $11,286,420,660 | $256,169,383 |
| SHIB | Shiba Inu | $0.00 | 1.85% | -3.96% | $10,112,436,731 | $155,119,969 |
| BCH | Bitcoin Cash | $452.53 | 15.09% | 15.44% | $8,932,734,707 | $507,638,767 |
| LINK | Chainlink | $13.84 | 1.52% | -3.64% | $8,414,845,280 | $205,310,580 |
| DOT | Polkadot | $5.83 | 1.40% | -7.82% | $8,380,854,991 | $102,519,631 |
| NEAR | NEAR Protocol | $5.56 | 0.83% | -10.41% | $6,154,619,031 | $192,074,548 |
| LTC | Litecoin | $75.96 | 5.94% | 3.68% | $5,681,753,962 | $319,593,297 |
| LEO | UNUS SED LEO | $5.83 | -0.14% | 1.36% | $5,397,303,095 | $1,028,291 |
Information current as of 5:20 AM PDT, Monday, July 29, 2024. Source: https://coinmarketcap.com
Check us out at https://beaconrwa.com and our affiliated websites at https://reverse-mortgages.us and https://socialsecurityquestionsanswered4u.com.
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,
MarketfieldAsset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poorâs, 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.