Stocks and Bonds Post Strong Week; Big Upcoming Week for Economic Data

Green across the screen – what a welcomed sight!  The Dow (+2.0%), NASDAQ (+3.3%), and S&P 500 (+2.6%) all showed a strong week, as well as taxable bonds (+1%) and tax-free municipal bonds (+0.3%), with the latter extending its gains to five straight weeks.  Last week was another example of “bad news is good news”, propelling all markets upward.

The June Leading Economic Indicators (LEIs) were up 1.4%, but showed a continued decrease and six of the ten indicators being negative, which is and often a precursor to a recession.  The Producers Manufacturing Index (PMI) for services in June fell to 47.0, as any value below 50 is considered in contraction, but the PMI also showed that inflation is slowing.  Put together, the economic data suggest that a cooling economy and moderating inflation reduces the risk of a recession, which caused investors to race into buying riskier assets.

This week is arguable the busiest week of the year on the economic calendar.  The Fed meets and is expected to raise interest rates by 0.75% on Wednesday.  On Thursday, the Q2 estimated GDP data will be released, and economists are expecting a tepid growth of 0.5%.  A negative value would represent two consecutive quarters of negative GDP growth, which is defined by some economists as a recession by some definitions.  Also this week, more than one-third of the S&P 500 companies will report their Q2 earnings results, including the five largest companies – Apple, Microsoft, Amazon, Google, and Facebook.  Lots to digest this week - let’s hope it’s good.

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