July 21, 2024
Volume 11, Issue 29
Weekly Recap
The major domestic equity indexes ended mixed last week as a rotation in market leadership to small-cap and value shares continued and market breadth improved. The narrowly focused Dow Jones Industrial Average outperformed, and value stocks outpaced growth stocks by 477 basis points (4.77 percentage points), as measured by Russell indexes – the largest divergence since March 2023. Last week was also notable for a widespread global disruption to computer systems on Friday due to an error in CrowdStrike’s security update to some users of the Microsoft operating system. The problems seemed to have little impact on U.S. trading, however.
A major factor in the underperformance of growth stocks was a sharp decline in chip stocks on Wednesday, following news that the Biden administration had told allies it was considering severe export curbs if companies such as Tokyo Electron and the Netherlands’ ASML Holding continued providing China with access to advanced semiconductor technology. Chip giants Taiwan Semiconductor Manufacturing, Broadcom, and NVIDIA (the third-largest S&P company by market capitalization) also fell sharply. Polls showing an increasing likelihood of a Republican sweep in the November elections also appeared to favor value stocks. The prospect of lighter banking regulation seemed to provide a boost to the value-oriented financials sector, for example, while the prospect of higher tariffs under a Trump administration may have favored industrials and business services shares.
Last week’s economic calendar generally surprised on the upside. Most notably, retail sales, excluding the volatile gas and auto segments, jumped 0.8 percent in June, well above consensus and the most since January 2023. Building permits rose 3.4 percent in June, also more than expected, putting an end to three consecutive monthly declines. Similarly, the Federal Reserve reported on Wednesday that industrial production had increased 0.6 percent in June, roughly double estimates. On Thursday, the Philadelphia Fed reported that its gauge of current regional business conditions had jumped to its highest level in three years.
The Labor Department’s report of weekly jobless claims was last week’s outlier, with the number of Americans filing for unemployment increasing to 243,000, rebounding to the nine-month high it established for the week ended June 8. More concerning was a 20,000 increase in continuing claims to 1,867,000, the highest number since November 2021. Fed Chair Jerome Powell addressed the central bank’s dual mandate during a speech on Monday, saying, “Now that inflation has come down and the labor market has indeed cooled off, we’re going to be looking at both mandates. They’re in much better balance.” The yield on the benchmark 10-year U.S. Treasury note seemed to fall alongside inflation concerns over much of the week before spiking Friday in reaction to the Microsoft disruptions and concerns over increased tariffs in a Trump Administration (thought increasingly likely) driving increased inflation.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
Advance estimates of U.S. retail and food services sales for June 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $704.3 billion, virtually unchanged from the previous month, but up 2.3 percent above June 2023. The April 2024 to May 2024 percent change was revised from up 0.1 percent to up 0.3 percent.
Industrial production rose 0.6 percent in June after advancing 0.9 percent in May. For the second quarter as a whole, industrial production increased at an annual rate of 4.3 percent. Manufacturing output moved up 0.4 percent in June and rose 3.4 percent (annual rate) in the second quarter. In the week ending July 13, the advance figure for seasonally adjusted initial jobless claims was 243,000, an increase of 20,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 222,000 to 223,000. The 4-week moving average was 234,750, an increase of 1,000 from the previous week’s revised average. The previous week’s average was revised up by 250 from 233,500 to 233,750.
Economic activity maintained a slight to modest pace of growth in a majority of Districts this reporting cycle. However, while seven Districts reported some level of increase in activity, five noted flat or declining activity – three more than in the prior reporting period.
On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For June, Realtor.com reported inventory was up 36.7 percent YoY, but still down 32.4 percent compared to April 2017 to 2019 levels. The Supreme Court has thrown a potential monkey wrench into the plans of those who use life insurance to fund a buy/sell agreement in a closely held business.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
- How do you know it’s time to retire? (Allie Volpe)
- How Does Inflation Impact Retirement? (Nick Maggiulli)
- Is High Inflation a Good Time for Roth IRA Conversions? (Christine Benz)
This is the best thing I’ve read recently. The saddest. The sweetest. The coolest. The most important. The most eye-opening. The best interview. The best idea. Dreadful. RIP, Bob Newhart.
Today, Americans 55 and over control nearly 70 percent of U.S. household wealth, according to the Federal Reserve. In 1989, the first year of available data, they controlled just 50 percent. Their dollars amount to 45 percent of U.S. personal spending, according to Moody’s Analytics, up from 29 percent three decades ago.
“Do not be fooled into believing that because a man is rich, he is necessarily smart. There is ample proof to the contrary.” ~ Julius Rosenwald
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.
