U.S. stocks consolidated last week’s gains on Monday but rose sharply on Friday following the strong June jobs numbers. Many investors had been nervous following May’s weak jobs report but the June jobs report alleviated these fears. The 10 year Treasury bond yield hit a record low of 1.38% as foreign buyers bought U.S. debt to escape negative rates at home. Most commodity prices were lower. Crude oil was lower based on signs that many of the global supply disruptions are easing. Gold finished the week higher. The British pound continued to fall and the U.S. dollar rose against a basket of currencies.
I wanted to take a few minutes to address this year’s elections since this is a question/concern that frequently comes up with clients. I have to be sensitive to my client’s political leanings so I will try to address this as neutrally as possible. While many find the uncertainty in this year’s election unsettling I want to emphasize the U.S. is and remains a country of checks and balances. Cases in point are the recent blocking of Obama’s hydraulic fracturing ban on Federal Lands by a federal judge and the effective blocking of Obama’s immigration policy by the Supreme Court. Regardless of how you feel about these issues, if a president tries to exceed his/her authority it will eventually get overturned in the courts. No outcome from this election will likely be as bad as some fear. No matter who wins they will have to deal with a Congress that not likely to go along with all their ideas. Clinton’s un-favorability rating makes it very unlikely that there will be a change of control in congress. If Trump wins there is no way a Republican or Democratic congress will go along with his more absurd ideas. In both cases there may be common ground in some areas. Never the less, expect drama during this month’s political conventions this month.
In the numbers this week.
- The Commerce Department reported that the trade gap rose by 10.1% in May from April as exports fell and imports rose. Weak global demand coupled with a strong dollar contributed to the decline in exports.
- The Federal Reserve reported that outstanding consumer credit (non-mortgage) rose a seasonally adjusted $18.56BN in May, this corresponds to a seasonally adjusted 6.18% increase up from April’s 4.48% increase.
- The Institute for Supply Management reported that the nonmanufacturing purchasing manager’s index rose to 56.5 in June from 52.9 in May showing a sharp acceleration in the services sector.
- The Labor Department reported
- First time claims for unemployment fell 16,000 to 254,000. The four week moving average of claims fell to 264.750. First time claims have now remained below 300,000 for 70 weeks, the longest stretch since 1973.
- The U.S. created 287,000 jobs in June, a sharp increase from the 11,000 jobs created in May. While the Verizon strike contributed to the volatility in the numbers that only accounted for about 35,000 jobs.
- The unemployment rate moved up from 4.7% to 4.9% as the labor force participation rate increased to 62.7%.
- The U.S. Energy Information Administration reported in the prior week
- Crude oil inventories fell 2.2MM barrels.
- Crude oil production fell from 8.62MM barrels per day to 8.43MM barrels per day in the week ended July 1.
- Gasoline inventories declined 0.1MM barrels.
- Baker Hughes reported that the US oil drilling rig count rose 10 to 351 and gas rigs fell 1 to 88.
- Markit Economics reported that the China Caixin services PMI rose to 52.7 in June from 51.2 in May. So while manufacturing is contracting, the services sector has been expanding.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF® Erik Smith
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.