Stocks Gain on Strong Economic Data; Bonds Flat
Good morning and welcome back from the holiday weekend! Lots to report from last week.
The Dow (+2.3%), NASDAQ (+1.6%), and S&P 500 (+1.7%) each posted strong gains last week, as they reached new all-time highs. Meanwhile, bonds were relatively flat, with taxable bonds falling 0.1% and tax-free municipal bonds gaining about 0.1%. The 10-year Treasury yield rose 0.07% to finish the week at 4.35%.
The Purchasing Managers Index (PMI) and Institute of Supply Managers (ISM) Indexes were reported last week, along with important jobs data. Global PMI bounced back in June after showing weakness in April and May, with the US being one of the world’s biggest gainers for the month. Overall composite PMIs have gained each of the last two months and are solidly in expansion territory. The ISM Manufacturing Inde gained, but new orders fell slightly. Meanwhile, the larger ISM Services Index exhibited great news, as it also gained and moved into expansion territory, along with the forward-looking New Orders component. Plus, the prices paid went down, which is good for either inflation or business profits. Lastly, the US jobs data was strong, as it added 147,000 jobs, about 20% higher than consensus estimates. Plus, the jobs data from the prior two months were revised upward.
The “Big Beautiful Bill” passed through Congress last week and was signed by President Trump on Friday. While this occurred after markets closed, it didn’t command much attention from investors. There are some nuances with the bill that change some tax laws (mostly favorable), but the main point is that the historically low tax brackets have been extended beyond their original deadline of December 31, 2025. We will be scouring the bill to evaluate its impacts on clients that can transcend into other tax planning strategies. Just as important, this item of uncertainty has now been removed, which definitely brings me joy that it’s early enough in the year to be able to plan for it.
Looking both backward and ahead, we are on the heels of the 4th time in history that the stock markets gained 25% in consecutive years. The prior times were 1934/1935, 1954/1955, and 1997/1998. The first episode was during the depression, and the markets fell 35% the following year. The other periods resulted in gains of 7.4% and 21%, respectively. According to Manulife (formerly John Hancock) Investments, market technicians (who had been doing a good job calling the markets the last several years) say that we are likely to see a rally “reminiscent of the bull run in the late 90’s”. The technicians claim there has been a recent broadening of markets, the price trend is positive, and sentiment is shifting from negative to positive. Let’s all hope they’re right!
Have a great day and terrific week!
Source: Yahoo Finance
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) 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. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
