July 2023 Market Review & Commentary
As we wind down the last few weeks of Summer, we hope that if you are currently traveling or traveling soon, that it is safe and enjoyable. Our family had a great month of July by getting away for our annual family trip to the beach in Avalon, New Jersey. Our family adventures always involve some form of excitement, and this year was no exception. Within the first hour of our trip up I-95 in the blazing July heat, the air conditioning in our old VW van met its demise. This did not create an immediate concern, but after sitting in traffic for a few hours in unbearable temperatures, it certainly made us all appreciate some of today’s modern conveniences. Just like our unexpected snag on our trip, everyone is waiting to see if the economy and the markets can get through their trip without a major snag.
The month of July seemed to have its air conditioning running just fine as it beat the heat even with the Federal Reserve increasing the Federal Funds rates by +0.25%, yet again. The cooling effect came from the fact that inflation data continued to show signs of slowing. The July inflation report showed that year-over-year inflation dropped to 3%, which was the lowest reading in 2 years. In addition to the cooling of inflation, we saw decent Second Quarter earnings reports and reasonable future guidance. Typically, the Second Quarter is not a period that is known for good reports, so this provided some bounce to the market’s step. All this information was well received by investors, and it allows for the crazy hope that a “soft landing” still might be possible, or at least the hope is kept alive for one more month.
In the end, the markets were able to avoid some large potential potholes during July with the DOW Jones finishing with a +3.35% return and the S&P 500 registering a +3.11% return. The US Economy during the Second Quarter expanded by a +2.4% annualized rate and the unemployment rate fell to 3.6% on continued strong employment data. Even though all these points are good, we certainly see challenges that lie ahead, and we are seeing some signs that the Federal Reserve's work is having an effect. Retail sales underperformed last month along with industrial production figures and sales of existing homes fell by -3.3% due to the tightening inventory of homes. We will be watching for the August Inflation (CPI) data along with continued readings of how the overall economy is withstanding the continued interest tightening of the Federal Reserve. In addition to the on-going economic indicators, we will be closely watching for the commentary coming out of the Economic Policy Symposium held at the end of August as to the state of not only the US but the global economy’s health.