Presented by Mark Gallagher

General Market News
• Treasury yields moved slightly lower across the curve last week as July’s Consumer Price Index report matched economist expectations. The 10-year Treasury yield fell 4 basis points (bps) to open Monday at 1.28 percent. The 2-year lost 1 bp to 0.20 percent, the 5-year shed 2 bps to 0.77 percent, and the 30-year was down 3 bps to about 1.9 percent.
• Trading in domestic markets was mixed, with the Dow Jones Industrial Average and S&P 500 Index up while the Nasdaq Composite and small-caps were down. Mixed trading was seen in international markets as well, with the MSCI EAFE Index up while emerging markets were down. Despite ongoing concerns over the Delta variant of the coronavirus, the Federal Reserve (Fed) has been preparing to lift its foot off the gas pedal of easy monetary policy. The financial sector was a top performer as it benefits directly from higher rates and a less accommodating Fed. Other leading sectors included materials, consumer staples, and utilities. Underperforming sectors included energy, consumer discretionary, and technology.
• On Wednesday, the Consumer Price Index for July was released. Consumer prices rose 0.5 percent, which was in line with expectations but a noted slowdown compared with the 0.9 percent increase in prices we saw in June. On a year-over-year basis, headline consumer prices increased 5.4 percent, which was slightly higher than economist estimates for a 5.3 percent increase. Core consumer prices, which strip out the impact of volatile food and energy prices, increased 0.3 percent for the month and 4.3 percent year-over-year. This was largely in line with forecasts that called for increases of 0.4 percent and 4.3 percent, respectively. The report showed a slowdown in inflationary pressure in some sectors that were affected by reopening efforts, including prices for air travel and used cars. The moderation in price growth for these reopening sectors helps support the Federal Reserve’s (Fed’s) view that much of the recent rise in prices will prove to be transitory.
• Thursday saw the release of the Producer Price Index for July. Producer prices increased 1 percent during the month against calls for a more modest 0.6 percent increase. On a year-over-year basis, producer prices increased 7.8 percent, which was up from 7.3 percent in June and higher than economist estimates for a 7.2 percent increase. Core producer prices, which strip out the impact of food and energy costs, also increased 1 percent against calls for a 0.5 percent increase. Core producer prices were up 6.2 percent on a year-over-year basis. As was the case with consumer prices, some reopening-related sectors saw moderate price growth; however, producer inflation still remains high on a historical basis. Producer prices have seen upward pressure this year caused by high levels of demand, supply chain constraints, and material shortages. Recently, producers have also started to contend with labor shortages, which also serve to increase inflationary pressure.
• We finished the week with Friday’s release of the preliminary estimate for the University of Michigan consumer sentiment survey for August. This widely monitored gauge of consumer confidence fell by more than expected to start the month, dropping from 81.2 in July to 70.2 in August against forecasts calling for no change. This brought the index to its lowest level since 2011. The decline was largely driven by worsening consumer views on future economic prospects, as the subindex that measures future expectations fell from 79 in July to 65.2 in August. Rising medical risks and persistent worries about inflation negatively affected consumer confidence during the month, and the current conditions subindex also declined by more than expected. Historically, higher levels of confidence have supported faster consumer spending growth, so this sharp decline is a concerning signal for future consumer spending. Given the fact that consumer spending is the major driver for the overall economy, this will be an important area to monitor in the months ahead.

Source: Bloomberg, as of August 13, 2021

Source: Morningstar Direct, as of August 13, 2021

What to Look Forward To
We’ll start the week with Tuesday’s release of the July retail sales report. Sales are expected to decline 0.3 percent after rising by 0.6 percent in June. Core retail sales, which strip out the impact of volatile auto and gas sales, are expected to remain flat, following a 1.1 percent surge in June driven largely by reopening-induced spending. High-frequency spending data showed that consumers continued to spend at newly reopened bars and restaurants in July. This is an encouraging sign that rising medical risks have not yet had a major impact on consumer spending. That said, a continued slowdown in auto sales is set to weigh on overall sales growth during the month. But, as sales have already recovered well past pre-pandemic levels, more moderate growth is expected as long as the economic recovery continues.

Tuesday will also see the release of the National Association of Home Builders Housing Market Index for August. This measure of home builder confidence is expected to remain unchanged at 80. This is a diffusion index, where values above 50 indicate growth, so the anticipated result would signal continued strength for new home construction. Home builder confidence rebounded swiftly following the end of initial lockdowns last year. If estimates hold, this report would mark 14 straight months of growth, keeping the index above the pre-pandemic high of 76 recorded in December 2019. Throughout the year, home builder confidence has been supported by strong levels of home buyer demand and low supply of existing homes for sale. Nonetheless, during this period, rising costs have served as a headwind for faster new home construction.

Speaking of new home construction, Wednesday will see the release of the July building permits and housing starts reports. Permits are expected to increase 1 percent, following a 5.1 percent decline in June. Starts are set to fall 2.3 percent in July, after seeing a 6.3 percent increase in June. Both of these measures of new home construction remain above pre-pandemic levels, however, supported by high home buyer demand and low supply of existing homes for sale. Although rising material costs have served as a headwind for faster construction throughout much of the year, a fall in lumber prices in July could support additional single-family housing starts. Housing has been one of the strongest sectors of the economy throughout this recovery, driven by record-low mortgage rates and shifting home buyer preference due to the pandemic. July’s reports on buildings permits and housing starts are expected to show continued strength for this important area of the economy.

Wednesday will also see the release of the Federal Open Market Committee (FOMC) meeting minutes from the Fed’s recent July meeting. The Fed cut interest rates to virtually zero last March in response to the pandemic, and rates are not expected to change until at least 2023. No major changes to monetary policy were made at the July FOMC meeting, but we did get hints that the Fed may be considering a change to its asset purchase program. Currently, the central bank purchases $120 billion per month in Treasury- and mortgage-backed securities. Economists widely expect the Fed to taper these purchases by the end of this year or in early 2022, however. The minutes are expected to indicate the potential path and timing of any purchase tapering. It should be noted, however, that the Fed will likely telegraph its tapering plans well before making any changes to minimize potential market impact.

On Thursday, the initial jobless claims report for the week ending August 14 will be released. Economists expect to see 365,000 initial claims filed during the week, in an improvement from the 375,000 initial claims filed the week before. If estimates prove accurate, this result would represent the lowest number of initial claims in a week since the start of the pandemic. It would also mark four straight weeks with declining initial jobless claims. Throughout the course of the year, we’ve made solid progress in lowering initial jobless claims. The continued momentum from recent reopening efforts is expected to drive further improvements despite rising medical risks. Looking forward, continued labor shortages and the expiration of enhanced unemployment benefits are expected to serve as a tailwind for further improvements. Still, increased uncertainty caused by the continued spread of the Delta variant remains a risk to the labor market recovery that bears monitoring.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.
Authored by the Investment Research team at Commonwealth Financial Network.
© 2020 Commonwealth Financial Network ®

Presented by Mark Gallagher

Solid July for Markets
July was a positive month for most markets despite rising medical risks. The three major U.S. indices saw all-time highs as the Nasdaq Composite gained 1.19 percent, the Dow Jones Industrial Average notched a 1.34 percent gain, and the S&P 500 led the way with a 2.38 percent return.

These positive returns coincided with more good news on the earnings front. According to Bloomberg Intelligence as of July 30, the second-quarter blended earnings growth rate for the S&P 500 was 89 percent (with 59 percent of companies reporting results). This year-over-year growth compares to when initial lockdowns suppressed earnings last year, but the current rate is higher than analyst estimates of a 65.9 percent increase at the start of earnings seasons. Better-than-expected earnings growth has been widespread across every sector in the index. Fundamentals drive long-term performance, so continued growth is a good sign for markets.

Technical factors also supported domestic markets as all three indices remained above their respective 200-day moving averages for the 13th consecutive month. Prolonged breaks above or below the 200-day moving average can indicate shifting investor sentiment for an index; this continued technical support is an encouraging sign that despite medical risks, investors remain confident in the ongoing economic recovery in the U.S.

Although performance was generally solid across domestic markets, the story was mixed on the international side. The MSCI EAFE Index experienced some volatility but was able to manage a 0.75 percent gain for the month. Rising medical risks due to the Delta variant spooked emerging investors; the MSCI Emerging Markets Index ended July down by 6.67 percent.

From a technical perspective, the MSCI EAFE Index remained well above its 200-day moving average throughout the month, marking nine straight months with continued technical support for developed international markets. The MSCI Emerging Markets Index fell midway through the month, ending below its trend line and breaking a 12-month streak of finishing above the 200-day moving average. This could be a sign of more risk for emerging markets going forward.

Fixed income markets also had a strong July as falling interest rates caused bond prices to rise. The 10-year U.S. Treasury yield fell from 1.48 percent at the start of the month to 1.24 percent at month-end. This marks the lowest month-end level for the 10-year yield since January as rising concerns about the Delta variant led some investors to seek the relative safety of fixed income. The Bloomberg Barclays U.S. Aggregate Bond Index ended the month with a 1.12 percent gain.

High-yield fixed income—typically less tied to interest rate movements—had a slightly muted month, with the Bloomberg Barclays U.S. Corporate High Yield Index increasing by 0.38 percent. High-yield credit spreads widened modestly during the month, a sign that investors were becoming slightly more cautious.

Medical Risks Rising but Still Contained
Despite noted progress on the public health front throughout most of the year, medical risks increased in July, driven in large part by the Delta variant. This more contagious form of the novel coronavirus led to more infections throughout the month as the average number of daily new cases grew by roughly five times in July. We’ve also seen a concerning upsurge in the amount of COVID-related hospitalizations, with the total number of hospitalized patients reaching a five-month high.

While overall numbers have deteriorated, so far case numbers are concentrated in a handful of states. The majority of the country still has the virus largely under control, which should limit the national impact. Behaviors such as seeking vaccinations and mask wearing—as we saw in previous waves—are becoming more prevalent in many areas, and there are signs the increase may be slowing. This is something we need to watch closely, but the most likely course of events is for the resurgence to once again be brought under control.

Economic Recovery Slowing but Solid
Although medical risks certainly rose during the month, the impact of those risks on the economic recovery is likely to be muted compared with last spring. With outbreaks limited by area, nationwide shutdowns appear unnecessary; even localized shutdowns in the most affected areas remain unlikely. In the absence of such shutdowns, the economy will remain open and growing.

Even though growth is likely to continue, there are signs it may be slowing. Labor market recovery has decelerated as layoffs remained stubbornly high in July and started to climb toward month-end following previous improvements. We’ve also seen business confidence pull back from record-high levels earlier in the year as rising uncertainty weighed on business owners.

Despite some data deterioration, however, the economy still has substantial momentum and continued growth remains the most likely path forward. Consumer confidence remains very strong despite rising medical risks, with the Conference Board Consumer Confidence Index increasing by more than expected in July. This result brought the overall level of consumer confidence in line with pre-pandemic levels, which should help support continued consumer spending growth following better-than-expected boosts for both retail sales and personal spending in June. Given the importance of consumer spending on the overall economy, the continually high level of consumer confidence and spending growth is a good sign for the pace of economic recovery.

Also encouraging is business confidence—while below recent highs, it’s still at very healthy levels, which should support continued business spending and investment. As you can see in Figure 1, the total level of durable goods orders has recovered past pre-pandemic levels, indicating a healthy recovery for business spending since the expiration of initial lockdowns last year.

Figure 1. Durable Goods Orders, 2010–Present

The fundamentals are still positive as both consumers and businesses remain confident—and spending—despite rising risks. As long as most of the country remains open, growth should continue even if we do see some slowing.

Rising Risks Indicate Caution Is Warranted
Despite rising medical risks, we are still in a much better place as a country on both the public health and economic fronts than we were even a couple of months ago. That said, July also reminds us that real risks to recovery remain. Though the spike in medical risks during the month has not yet caused significant economic or market impact, those risks should be closely monitored. The key question looking forward will be whether rising localized infection rates lead to another national wave of infection growth. It does represent a very real risk to acknowledge and watch, however unlikely it currently appears.

Aside from rising medical risks, we have normal risks as well. Continued negotiations on the size and scope of the potential infrastructure deal from Washington have caused uncertainty. Looming in the near future is the fact that Congress needs to address the federal debt limit, which could lead to a potential government shutdown as early as October. These political risks are not necessarily immediate concerns; however, uncertainty has the potential to weigh on investors and markets in the months ahead.

While these and other risks may prompt increased ambiguity and instability in the months ahead, it’s important to focus on the bigger picture over a long-term horizon. A well-diversified portfolio that matches goals and timelines remains the best path forward for most investors. If you have concerns, reach out to your financial advisor to review your financial plan.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.
Authored by the Investment Research team at Commonwealth Financial Network.
© 2020 Commonwealth Financial Network ®

Presented by Mark Gallagher

General Market News
• Treasury yields moved slightly lower across the curve week-over-week. The 10-year Treasury yield slid about 7 basis points (bps) to open near 1.21 percent. The 2-year fell roughly 2 bps to 0.17 percent, the 5-year dropped approximately 5 bps to 0.67 percent, and the 30-year shed 5 bps to about 1.89 percent. Investors are in a holding pattern after last week’s Federal Reserve (Fed) meeting, awaiting guidance on impending monetary policy shifts.
• U.S. equity markets were down as we entered a busy week of earnings, with market giants Tesla, Apple, Microsoft, Google, Facebook, and Amazon all reporting. Despite each beating expectations by at least 14 percent, several sold off because of peak-growth concerns. Amazon was down 9 percent despite beating earnings estimates by roughly 23 percent; e-commerce sales growth dropped to 16 percent for the quarter, compared with 49 percent last year during the worst of the pandemic. Top-performing sectors included financials, materials, health care, and energy. In addition to consumer discretionary, other underperforming sectors included technology and communication services.
• On Tuesday, the preliminary estimate of the June durable goods orders report was released. Orders increased 0.8 percent, below economist expectations for a 2.2 percent increase. The report also showed that May’s durable goods orders growth was upwardly revised from 2.3 percent to 3.2 percent, so the miss in June against expectations isn’t as bad as it first looks. Core durable goods orders, which strip out the impact of volatile transportation orders, increased 0.3 percent following an upwardly revised 0.5 percent increase in June. This marks four straight months with core durable goods orders growth, an encouraging sign for business spending during the second quarter. The continued growth in headline and core orders was especially impressive, given that the overall level of orders has already passed pre-pandemic levels.
• Tuesday also saw the release of the Conference Board Consumer Confidence Index for July. This widely followed measure of consumer confidence increased more than expected, from an upwardly revised 128.9 in June to 129.1 in July against calls for a decline to 123.9. This result brought the index to its highest level since the start of the pandemic. This marks six straight months with improving confidence, as positive developments on the public health front and reopening efforts throughout the first half of the year supported improved sentiment. One area of notable strength in the report was the share of consumers who cited that jobs were plentiful, reaching a 21-year high during the month. Overall, this was an encouraging report that signaled continued high levels of consumer confidence, despite rising medical risks from the Delta variant.
• On Wednesday, the Federal Open Market Committee (FOMC) rate decision from the Fed’s July meeting was released. The Fed cut rates to virtually zero last year in response to the pandemic, and there were no changes to rates at this meeting, as expected. The major focus was on the Fed’s news release and Chair Jerome Powell’s post-meeting news conference. The Fed is currently purchasing $120 billion in Treasury and mortgage bonds per month, and it did not change the pace of asset purchases at this meeting. With that being said, the news release noted that the economic recovery has made additional progress toward the Fed’s dual mandate of maximum employment and long-term inflation at 2 percent. Given improving economic fundamentals, economists expect to see further discussion on potential taper timing from upcoming Fed meetings; however, any change to the asset purchasing program is expected to be communicated well in advance to limit potential market volatility.
• On Thursday, the advance report of annualized GDP growth in the second quarter was released. The report showed that the economy grew at an annualized rate of 6.5 percent during the quarter, which was up from the downwardly revised 6.3 percent annualized growth rate we saw in the first quarter but below expectations for an 8.4 percent growth rate. This miss against expectations was primarily due to headwinds from international trade and declining business inventories, which, combined, took roughly 1.5 percent off of the overall growth rate in the second quarter. The silver lining from the report was personal consumption, which increased 11.8 percent on an annualized basis during the quarter against calls for a more modest 10.5 percent growth rate. This represents the second-best quarter for personal consumption growth since 1952 and signals that high levels of consumer saving throughout the pandemic continued to support spending growth during the quarter. Although overall economic growth missed against expectations, strong personal consumption growth is a good sign for the overall health of the economic recovery.
• Friday saw the release of the personal income and personal spending reports for June. Personal spending increased 1 percent against calls for a more modest 0.7 percent increase. The better-than-expected result was driven in large part by increased spending on services, as nationwide reopening efforts allowed consumers to dine out and travel. This marked four straight months with increased service spending, which is an encouraging sign that consumer demand remains robust. Personal income has been very volatile on a month-to-month basis throughout the pandemic and economic recovery, as federal stimulus payments have led to large monthly swings in income growth. Personal income increased 0.1 percent during the month, which was above economist estimates for a 0.3 percent decline. The increase was largely due to rising wage income, which, in turn, was supported by reopening efforts and a short supply of potential workers. Given the high levels of consumer confidence and the continuing economic recovery, spending and income are expected to show continued improvements in the months ahead.

Source: Bloomberg, as of July 30, 2021

Source: Morningstar Direct, as of July 30, 2021

What to Look Forward To
On Monday, the Institute for Supply Management (ISM) Manufacturing index for July was released. This widely monitored gauge of manufacturer confidence declined modestly, falling from 60.6 in June to 59.5 in July against forecasts for an increase to 61. As this is a diffusion index, where values above 50 indicate expansion, the result demonstrates continued strength in manufacturer production despite the miss against expectations. Supply constraints remained a headwind for production growth in July, as order backlogs increased. Rising material costs, tangled supply chains, and labor shortages have negatively affected manufacturers over the past few months. Nonetheless, throughout the year, high levels of consumer demand have supported increased output. In addition, the July report showed a welcome pickup in manufacturing employment, demonstrating that manufacturers succeeded in finding workers to address high levels of consumer demand. Overall, this report was relatively encouraging, signaling continued growth despite the headwinds facing the manufacturing sector.

Wednesday will see the release of the ISM Services index for July. Service sector confidence is expected to show modest improvement, as economist forecasts call for the index to rise from 60.1 in June to 60.5 in July. This is another diffusion index, where values above 50 indicate expansion. So, if estimates hold, the result would demonstrate accelerated growth during the month. The service sector accounts for the lion’s share of economic activity in the U.S., so any improvement for the index would be an encouraging sign for the overall economic recovery. As was the case with manufacturer confidence, service sector confidence has remained in expansionary territory and well above pre-pandemic levels since June of last year. This indicates that businesses across industry sectors remain confident and willing to spend.

On Thursday, the June international trade report is set to be released. Economists expect to see the trade deficit widen from $71.2 billion in May to $73.0 billion in June. If estimates hold, this report would bring the deficit to its second-widest level on record, trailing only the $75 billion deficit recorded in March of this year. The advance report on the trade of goods showed a 0.3 percent increase in goods exports in June, but a 1.5 percent increase in the import of goods was more than enough to offset the modest export growth. High levels of domestic consumer demand have driven a surge in imports throughout the year, which has weighed on overall economic growth. With that said, the continued global economic recovery is expected to serve as a tailwind for further export growth and recovery.

Thursday will also see the release of the initial jobless claims report for the week ending July 31. Economist forecasts call for initial claims to decline from 400,000 the week before to 378,000. If the estimates prove accurate, this report will mark the fewest number of initial claims in three weeks. It would also bring the number of claims close to the post-pandemic low of 368,000 set during the week ending July 9. Still, though notable progress has been made in reducing claims, compared with data from earlier in the year, the pace of improvement slowed in June and July. Concerns about the Delta variant of the coronavirus may be playing a part in the slowdown. But, given the volatile nature of weekly initial unemployment claims, it’s too early to tell if rising medical risks have negatively affected the labor market recovery. If claims decline to end July, this report will indicate that the labor market recovery continues.

Speaking of the labor market recovery, we’ll finish the week with Friday’s release of the July employment report. Economists expect to see 900,000 jobs added during the month, a step up from the 850,000 jobs added in June. If estimates hold, this report would represent the greatest number of jobs added during a month since August 2020. It would also mark seven straight months of job growth. Following accelerated hiring in June, growth in July would be an encouraging sign that reopening efforts are continuing to boost the labor market. The underlying data should also improve for the month. The unemployment rate is set to fall from 5.9 percent in June to 5.6 percent in July, and year-over-year growth for average hourly earnings should increase from 3.6 percent to 3.9 percent. If estimates prove accurate, they would signal that the labor market recovery continued to pick up steam to start the second half of the year.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg Barclays US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg Barclays US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.
Authored by the Investment Research team at Commonwealth Financial Network.
© 2020 Commonwealth Financial Network ®