Back to Market Commentaries

Weekly Market Review

23 July 2019

Clint McGarvin, CFA® | Portfolio Manager/Research Analyst

Week Ending July 19, 2019


U.S. equities struggled last week as earnings season kicked off Monday. The S&P 500® did not react positively to the solid growth in earnings as large caps declined a little more than 1.2% while small caps were down nearly 1.5%. The consumer has supported the economy this year as the trade war cut into business optimism as well as business spending. This trend continued in June as retail sales increased a strong 0.4%, up 3.4% year-over-year. The June increase includes a decline in gas prices.  By stripping out gas sales, retail sales jumped 0.7% month-over-month. Internet retailers were once again the strength of the sector, rising 1.7% in the month and increasing 13.4% year-over-year.[i] Consumer spending was weak in the first quarter but picked up in the second quarter suggesting the health of the consumer is strong and may keep the economy growing in the second half of the year. Conversely, the Fed’s industrial production was flat in June compared to May but was down 1.2% in the second quarter following a 1.9% decline in the first. According to the Fed’s data, the manufacturing sector is in a recession if we use the definition of two consecutive quarters of decline.[ii] There is a bright spot for the manufacturing sector as the Philadelphia Fed manufacturing index jumped to 21.8 last month from 0.3 in June as 56.1% of the firms in the index reported an increase in demand.[iii]

Other economic releases last week:

Housing starts declined again in June falling to 1.253 million from 1.265 million in May.

Consumer sentiment increased to 98.4 in June from 98.2 in May.

Capacity utilization declined slightly to 77.9% from 78.1% in May.

Approximately 10% of S&P 500® firms have reported earnings with year-over-year growth of 8% with banks up 6%, a positive start to earnings season.


International developed equities trended in the same direction as the U.S., falling about 0.1% on the week. On the other hand, emerging markets were higher on the week by about 0.7%. Emerging markets benefitted from data out of China showing exports were down less than expected falling 1.3% compared to the expected decline of 2.0%, suggesting that the negative effects of the trade war may be waning. The manufacturing sector of the European economy has been in a recession, but manufacturing activity, at least temporarily, improved in June as output was up 0.9%, easily beating expectations.[iv]

Fixed Income

Fixed income markets exhibited negative correlations with equities last week as long-term Treasuries jumped nearly 1% and high-quality bonds were up almost 40 basis points. The 3-month to 10-year segment of the Treasury yield curve moved in the right direction as the 3-month yield declined 8 basis points while the 10-year was down 7 basis points, so the negative spread ended the week at 1 basis point.


In the U.S. the economic data showed contrary trends. The consumer continues to spend at the retail level, but manufacturing has fallen into an apparent recession. We see the same trend internationally as European manufacturing is in a recession based on economic indicators. However, June potentially saw a reversal in the manufacturing recession as European industrial production increased and the Philly manufacturing index jumped last month. Earnings in the U.S. have come in positive as well, which bodes well for the markets in the second half of the year as earnings growth is expected to accelerate over the last two quarters.

Upcoming Reports

Previous Expected
Existing-Home Sales 5.33 million 5.34 million
Markit manufacturing PMI 50.6
Markit services PMI 51.5
New Home Sales 640,000 626,000
Durable goods orders 0.8% -1.3%
Q2 GDP 2.1% 3.1% first quarter

Past performance is no guarantee of future returns.  Performance discussed represents total returns that include income, realized and unrealized gains and losses. Nothing presented herein is or is intended to constitute investment advice or recommendations to buy or sell any types of securities and no investment decision should be made based solely on information provided herein. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for an investor’s financial situation or risk tolerance. Diversification and asset allocation do not ensure a profit or protect against a loss. All performance results should be considered in light of the market and economic conditions that prevailed at the time those results were generated. Before investing, consider investment objectives, risks, fees and expenses.
Frontier does not directly use economic data as a part of its investment process.
Information provided herein reflects Frontier’s views as of the date of this newsletter and can change at any time without notice.  Frontier obtained some of the information provided herein from third party sources believed to be reliable, but it is not guaranteed, and Frontier does not warrant or guarantee the accuracy or completeness of such information. The use of such sources does not constitute an endorsement. Frontier’s use of external articles should in no way be considered a validation. The views and opinions of these authors are theirs alone. Reader accesses the links or websites at their own risk. Frontier is not responsible for any adverse outcomes from references provided and cannot guarantee their safety. Frontier does not have a position on the contents of these articles. Frontier does not have an affiliation with any author, company or security noted within.
Exclusive reliance on the information herein is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance.  References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell any securities, commodities, treasuries or financial instruments of any kind.  This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal, investment or tax advice.
Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision.In reviewing the performance information presented here, we recommend that you consider both the returns generated and the level of risk that was assumed in generating those results. We believe that performance information cannot be properly assessed without understanding the amount of risk that was taken in delivering that performance. The performance information presented here covers different time periods. We present performance information for short time periods because we understand that clients and potential Investors are interested in this information, however, we recommend against making any investment decisions based on short-term performance information. For any investment products mentioned herein, a complete description of their investment objectives, along with details of the risks and fees involved is contained in their respective prospectus and statement of additional information, which is available on their websites and should be read fully.
It is generally not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available through third party investable instruments (if any) based on that index.

[i] U.S. Census (2019), Advance Monthly Sales for Retail and Food Services, June 2019. Retrieved from
[ii] Federal Reserve Statistical Release (2019), Industrial Production and Capacity Utilization. Retrieved from
[iii] Philadelphia Fed (2019), Manufacturing Business Outlook Survey, July 2019. Retrieved from
[iv] CNBC (2019), European Stocks Close Flat Following Euro Zone, China Data; Thomas Cook Plunges 60%. Retrieved from

Market Commentaries

Emerging Markets, Today's Markets, U.S. Markets