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Stocks Post Fourth Week of Gains

Stocks racked up another week of gains. While investors focused on inflation figures (more on that in a minute) corporate earnings continue to impress. The blended growth rate for the S&P 500 for the second quarter was 6.7%. However, when you strip out the energy sector, corporate earnings declined 4%. Considering all the challenges inflation poses to the U.S. economy, second quarter earnings weren’t as bad as expected.

The big news last week was very welcomed by investors. Inflation has been on everyone’s mind as we’re all wondering, when will it peak and begin to subside? With July’s Consumer Price Index reading, we might be in luck. The CPI for July came in at 8.5% over the same month last year. That’s down from June’s reading of 9.1%. Falling energy prices had a major impact on the CPI number. The main energy section of the report saw a decrease of 4.6% which was led by a decrease of 11% in fuel oil. The core CPI, which excludes volatile food and energy prices came in at a reading of 5.9%.

The chart below comes from the Labor Department. You might need a magnifying glass to really see the line below falling slightly. But at least it is falling.

Prices at the producer level followed a similar decline.

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The Markets and Economy

  • Over the last 30 years, the S&P 500 has gained an average 10% a year in total return. If you remove the best 22 trading days out of the total 7,554 trading days for the entire 30-year period, the average annual return drops to just 5%. This underscores the importance of riding out bear markets and instead focus on which sectors are performing better.

 

  • American consumers are feeling better about inflation. The July survey of Consumer Expectations from the Federal Reserve Bank of New York showed a drop in consumer expectation for inflation for 2023 to 6.2% down from June’s expectation of 6.8%. Consumers outlook for 2024 fell to 3.2% from the previous expectation of 3.6%. Prices at the producer level also followed a similar trend.

 

  • The United Nations and S. Census Bureau project that global population will reach 8 billion people around November 15, 2022. However, predictors say the world’s population may never reach nine or ten billion. The main reasons are, shrinking countries, aging populations and dwindling workforces.

 

  • Americans are retiring later. A recent 30-year survey found that workers are staying on the job approximately 4-5 years longer. 30 years ago, workers average retirement age was between 57-61. Now the average retirement age is between 61 -65. Starting in 1880, American men began retiring at a younger age. This was probably due to pensions awarded to Civil War That trend of earlier retirement continued for about 100 years. However, in the 1980’s Congress raised the full retirement age from 65 to 67 due to longer life expectancies. With life expectancies continuing to increase, and the Social Security projected to run out of funds in 2027, you can expect Congress to increase full retirement age again.

 

  • Consumer sentiment continues its gradual improvement. Preliminary readings for August shows a reading of 55.1, up from July’s5 number. Consumer sentiment has been increasing all summer after hitting its lowest level in 60 years.

 

  • According to the Labor Department, wage growth continues to rise. Average hourly earnings grew by 5.2% in July from a year earlier. Annual wage gains have exceeded 5% each month this year.

The National Association of Realtors housing-affordability index which factors in family incomes, mortgage rates and the sales price of existing single-family homes fell to 98.5 in June. That marked the lowest level since June 1989.

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.

This newsletter was prepared by David M. Kover®. To unsubscribe from the Weekly Market Update please write us at 555 Eastport Centre Dr., Suite B, Valparaiso, IN 46383 or click this link:  Unsubscribe .

Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors, LLC.

David M. Kover, Thomas H. Parker, Bradford E. Harris, Laura T. Scobee, Joseph B. Thaman & Brett M. Dankowski are registered to recommend securities offered through Triad Advisors, member FINRA/ SIPC. Investment advice offered through Resources Investment Advisors, Inc., an SEC-registered investment adviser. Resources Investment Advisors, Inc. and Vertical Financial Group are not affiliated with Triad Advisors.