Strong U.S. economic growth made additional interest rate hikes likely. The likelihood of additional hikes and weak earnings from a couple key technology companies was not enough to overcome positive news earlier in the week on trade between the Europe Union and U.S. Discussions are moving forward to rescind the announced metal tariffs and reduce tariffs on industrial goods. The S&P 500 rose 0.6% for the week. Global stocks, as measured by the MSCI ACWI, climbed 0.9% higher. The Bloomberg BarCap Aggregate Bond Index dropped 0.2%.
Key points for the week
- U.S. GDP rose 4.1% as strong consumer spending and a rush to buy soybeans ahead of tariffs pushed growth higher.
- The U.S. and European Union moved toward resolving certain trade disputes.
- Facebook’s earnings report disappointed, and the stock set a new record for value lost in a single day.
GDP Exceeds 4% in Second Quarter
U.S. gross domestic product rose at a 4.1% annualized rate in the second quarter. The strong growth was boosted by heavy consumer spending and Chinese buyers stocking up on soybeans ahead of tariffs. Excluding the boost in exports, the underlying growth story remained very strong. Sales to private domestic buyers rose 4.3%. This measure excludes the more volatile categories of trade, inventories, and government spending and provides a core estimate of economic strength. The strong economic performance was expected and reinforced expectations the Federal Reserve would continue to raise rates at a steady pace.
Fun Story of The Week
The DMV is a place of many rules, but the one that most often requires reiteration is no smiling in the driver’s license picture. One DMV in Cleveland decided to guarantee adherence by placing a picture of Lebron James in a Lakers jersey under the camera. Lebron James, one of the world’s most famous athletes and a hometown hero, recently left the Cleveland Cavaliers for the Los Angeles Lakers, leaving Cleveland fans heartbroken. Not much to smile about.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
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.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.