Last week was volatile in the stock market but ended on a strong note, thanks to stronger-than-expected economic growth in the second quarter and a key inflation measure holding steady from the previous month. With the strong gains on Friday, the S&P 500 managed to recover some of its earlier losses, though it still ended the week down by almost 1%. The tech-heavy NASDAQ lost over 2% for the week. However, small-cap stocks gained 3%, continuing the rotation into smaller companies. Since July 10th, when this rotation began, small caps have outperformed the S&P 500 by over 12%. For the week, interest rates moved lower, with ten-year Treasury yields ending the week at 4.20%.

Regarding economic growth, there were two notable positive developments last week: GDP and corporate earnings growth. The first estimate of 2Q GDP came in at 2.8%, significantly higher than the 1.9% consensus expectation. Most of this growth was driven by an increase in consumer spending, with a surprising boost from business investment in equipment. On the corporate earnings front, according to FactSet's latest Earnings Insight report, the blended earnings growth rate for Q2 S&P 500 EPS currently stands at 9.8%. This is an improvement from last week and better than the 8.9% expected before earnings season. If this growth rate holds, it will be the best quarter for year-over-year earnings growth since 4Q21.

Looking ahead, this week features the Federal Reserve meeting (July 31st). It is widely expected that the Fed will not change rates at this meeting, as markets are anticipating a rate cut at the September meeting. Additionally, Friday brings the latest update on the unemployment rate. While job growth has remained respectable, the unemployment rate has been creeping higher, raising concerns among economists that a gradual increase in unemployment could lead to a sharp rise.

This week is also significant for earnings reports, with four of the "Magnificent 7" companies — Apple, Microsoft, Amazon, and Meta (Facebook) — reporting their results. These updates will be crucial for insights into the prospects of artificial intelligence, which has been a key driver of the overall stock market this year. However, enthusiasm for AI has dipped in recent weeks. Will these earnings updates reignite investor enthusiasm? This will be a key item to watch.

And speaking of watching, this week will also see a lot of attention on the summer Olympics. Go Team USA!

In summary:

 

Stay invested. Stay diversified. Stay disciplined.

 

If you have any questions or comments, please let us know at strategists@brinkercapital.com or at rusty@orion.com. Thank you for your time and trust. See you next week!


 

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Key Data

Stocks, Bonds, Alternatives, & Real Assets as of July 26, 2024

Security Name

Risk Score

1 Wk

1 Mo

QTD

YTD

1 Yr

3 Yr Ann.

Global Equities (60% US, 40% Intl)

100

-0.76%

0.50%

0.61%

11.31%

16.27%

5.44%

S&P 500 Total Return

102

-0.82%

-0.26%

0.05%

15.35%

21.35%

8.96%

Dow Jones Industrial Average

97

0.77%

3.84%

3.86%

8.84%

16.62%

7.09%

NASDAQ 100 Total Return

122

-2.55%

-3.65%

-3.32%

13.57%

23.79%

8.83%

TV Benchmark

107

-0.87%

-0.02%

0.20%

12.59%

20.59%

8.29%

Morningstar US Large Cap

102

-1.12%

-1.09%

-0.67%

17.04%

24.18%

9.08%

Morningstar US Mid Cap

113

0.49%

3.31%

2.94%

8.34%

12.13%

4.03%

Morningstar US Small Cap

125

2.14%

7.58%

6.39%

8.36%

12.99%

3.19%

Morningstar US Value

98

1.63%

5.51%

5.12%

12.28%

16.19%

9.87%

Morningstar US Growth

126

-0.44%

0.37%

-0.12%

10.81%

17.43%

0.46%

MSCI ACWI Ex USA 

98

-1.06%

0.63%

0.68%

6.76%

9.58%

1.79%

MSCI EAFE 

101

-0.95%

0.86%

1.04%

6.85%

10.59%

3.58%

MSCI EM

98

-1.56%

-0.69%

-0.80%

6.81%

6.98%

-2.76%

Bloomberg US Agg Bond Index

27

-0.27%

1.21%

1.48%

0.76%

3.89%

-2.81%

Bloomberg Commodity Index

70

-1.46%

-4.66%

-4.59%

0.32%

-5.82%

3.25%

Wilshire Liquid Alternative Index

25

0.03%

0.40%

0.47%

4.16%

7.04%

1.50%

US Dollar

10

0.17%

-1.19%

-1.43%

2.98%

2.97%

3.95%

Bloomberg US Treasury Bill 1-3mo

1

0.10%

0.47%

0.41%

3.10%

5.54%

3.25%

Source: Morningstar

The TV Benchmark represents an average of the S&P 500, Dow Jones IA, and NASDAQ 100 return indexes. The Orion Risk Score represents risk relative to the global equity market.

 

 

Interest Rates as of July 26, 2024

Rate

This Week

1 Wk Δ%

13-Wk Treasury Yield

5.15%

-0.04%

10-Yr Treasury Yield

4.20%

-0.04%

Bloomberg US Agg Yield

4.88%

-0.04%

Avg Money Mkt Yield

5.12%

0.00%

Avg 30-Yr Mortgage Rate

6.86%

0.00%

Sources: Yahoo Finance, S&P Global, Crane Data, BankRate

 

 

Key Economic Data Last Week

Data Point

Expectation

Actual

New Home Sales

640,000

617,000

Q2 GDP

2.1%

2.8%

Durable Goods Orders

0.3%

-6.6%

Personal Income

0.4%

0.2%

PCE

2.5%

2.5%

PCE YoY

2.6%

2.6%

Sources: MarketWatch, First Trust

 

 

Key Economic Data This Week

Data Point

Expectation

Release Date

ADP Employment

168,000

7/31/24

FOMC Interest Rate Decision

Pause

7/31/24

ISM Manufacturing

48.8%

8/1/24

Nonfarm Payrolls

190,000

8/2/24

US Unemployment Rate

4.1%

8/2/24

Source: MarketWatch

 

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The views expressed herein are exclusively those of Orion Portfolio Solutions, LLC d/b/a Brinker Capital Investments a registered investment advisor, and are not meant as investment advice and are subject to change.
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