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Weekly Market Review

30 July 2019

Clint McGarvin, CFA® | Portfolio Manager/Research Analyst

Week Ending July 26, 2019


U.S. equities had a great week with large caps rising about 1.7% and small caps up a strong 2.0%. The two biggest economic reports out last week were the second-quarter GDP report on Friday and the durable goods orders released on Thursday. The GDP report is of course backward looking, and it showed that economic growth slowed to 2.1% in the second quarter compared to the first-quarter growth of 3.1%. The trade war is being blamed for the slowdown which translated to lower business spending which declined 5.5% from the first quarter. Conversely, we received further confirmation that the consumer remains healthy as spending jumped 4.3% over the first quarter, which is the highest growth rate since the fourth quarter of 2017. Government spending also posted a strong increase of 5.0%, the highest rate of growth in at least three years.[i] The strong consumer spending number coupled with labor markets and wages that continue to rise suggests that the economy could expand through the rest of the year and into 2020. The decline in business spending was expected given the weakness in the manufacturing sector in the quarter, but there have been a couple of reports that indicate that business spending may move higher. First, durable goods orders increased by 2.0% in June, the first increase since February.[ii] Core capital goods, which is a proxy for business spending, increased 1.9% in June, this growth follows the 0.4% increase in May. This coincides with the Chicago Fed National Activity Index which showed a pickup in activity in June closer to the historical trend of economic activity.[iii]

Other items of note last week:

  • Existing home sales declined to 5.27 million from 5.33 million showing the housing market is still struggling.
  • IHS Markit manufacturing Purchasing Managers’ Index (PMI) declined from 50.6 to 50.0, so the manufacturing sector is barely expanding.
  • IHS Markit services PMI accelerated to 52.2 from 51.5 in May.


Developed market stocks struggled last week rising about 0.2% while emerging markets declined a little more than 0.8%. The European Central Bank has given markets mixed messages, first indicating that more stimulus was on the way since economic conditions were worsening. However, during a press conference, ECB President Mario Draghi indicated that some members of the ECB were not convinced on the stimulus package. Mr. Draghi further commented that the risk of a recession was low.[iv] The IHS Markit Flash PMI showed that the composite index declined to 51.5 in July from 52.2 in June with manufacturing dropping to a 79-month low of 46.4. The service sector in Europe also declined slightly falling to 53.3 from 53.6.

Fixed Income

Bonds posted negative returns last week with long-dated Treasuries falling about 0.3% while high-quality bonds were down just a few basis points. Treasury yields increased during the week as the 10-year increased 3 basis points to 2.08% and the three-month rose 6 basis points to yield 2.12%. The expectation is the Fed will cut rates 0.25% at the meeting this week in a pre-emptive strike due to the slowing economy presumably caused by the trade war. Given the move lower in interest rates since early May (the three-month T-bill has declined from 2.47% and the 10-year Treasury is down from 2.55%), the market has priced in this cut, doing the job of the Fed before they acted.


The recent GDP report suggests economic growth has slowed. The slowing economy does not appear to have dampened consumer spending and there are early signs that business spending may be rebounding with core durable goods orders turning positive the past two months. We will get more news this week on the direction of business activity when the manufacturing and services indices are released from both ISM and IHS Markit.

Economic reports for the week of July 29, 2019

Expected Previous
Personal Income  0.4%   0.5%
Consumer Spending (PCE) 0.3%  0.4%
PCE Inflation 0.2% 0.2%
ADP Employment N/A 102,000
ISM Manufacturing  51.6% 51.7%
IHS Markit Manufacturing  N/A 50.0
Non-farm Payrolls 160,000 224,000
Consumer Sentiment 98.5 98.4
Consumer Confidence 126.0 121.5


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[i] Bureau of Economic Development (2019), National Income and Product Accounts Gross Domestic Product, Second Quarter 2019 (Advance Estimate) and Annual Update. Retrieved from
[ii] US Census Bureau (2019) Monthly Advance Report on Manufacturers’ Shipments, Inventories and Orders June 2019. Retrieved from
[iii] Federal Reserve Bank of Chicago (2019), Chicago Fed National Activity Index (CFNAI). Retrieved from
[iv] CNBC (2019), European Markets Close Lower After Draghi’s Mixed Message on Stimulus. Retrieved from

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