During this week's celebration of Independence Day in the US, it may be worthwhile to reflect on where we are as a nation. That is what the July 1st edition of Economist magazine did in "A Special Report on a Divided Country." The Economist wrote: "He (President Trump) promised to fix America's politics, but it is more broken than ever. Badly needed reforms are failing, America's Institutions are under attack and its political culture is poisonous. Sooner or later the harm will spread beyond the beltway and into the economy." To solve our nation's problems will take a different approach. Over the past months, a dozen of concerned citizens in mid-coast Maine have gotten together to see what we could do to effect a change. We decided to write an Open Letter to our Senator Susan Collins and place it as an ad in local papers. We hoped to get 100 signatures. Within a week we had 363 signatures. The response has been overwhelming. Visit our web site, www.midcoast4democracy.org and click on "In the News" to see readable copies of the ads and read the article in the Boston Globe about our group. Comments and thoughts can be directed to: midcoast4democracy@gmail.com. |
Economic Releases: Consumer Confidence The chart below shows the long history of the University of Michigan's Consumer Sentiment Surveys. They final Survey for June rose a point in the second half of the month to 95.1, but has slipped off its 97.1 measure in May. The survey was helped by an increase in the current conditions, but hurt by expectations and inflation worries. The Conference Board (CB) also surveys Consumer Confidence; their read for June is 118.9, above the range of analysts' expectations. The Conference Board's read on consumer expectations is strong, but softer than May; inflationary expectations was also of concern to those surveyed. Source: St Louis Federal Reserve, FRED, Econoday via WSJ.com |
Other US Releases: Home Prices rose +0.3% (SA) in April, according to the Case/Shiller Home Price Index; the unadjusted increase was +0.9% over March and +5.7% over a year ago; the report was just below the range of expectations. In May, Pending Home Sales fell -0.8%, well below the range of expectations. Personal Income rose +0.4% in May, but Spending increased only +0.1%. 1st quarter GDP was revised up 2 ticks to 1.4% with Real Consumer Spending leading the pack, doubling the prior estimate to +1.1%. Initial Claims for Unemployment Benefits inched higher to 244,000; the 4-week average fell to 242,250; Continuing Claims rose to 1.948 million, still near Great Recession lows. In summary, both the surveys and the data indicate that current conditions are good, but consumers appear to have some concerns about the future. Source: Econoday and the Wall Street Journal |
Economic Releases outside the US In the European Union, Consumer, Industrial, and Economic Sentiment all improved in June. Likewise in Germany, the Ifo Survey reported improvements in Economic Sentiment, Current Conditions, and Business Expectations in June. Germany's Retail Sales increased +0,5% in May and its Unemployment Rate remained 5.7% in June. UK's 1st quarter GDP remained unrevised at +0.2% in the 1st quarter. Japan's Retail Sales increased +2.0% in May (year-over-year), down from 3.2% in April. Unemployment, though, increased 3 ticks to 3.1% and Industrial Production fell -3.3% in May. In China, the CFLP Manufacturing Purchasing Managers' Index increased a half point to 51.7 in June. Source: Econoday and the Wall Street Journal |
Equity and Bond Index Returns: Equity markets reflected much of the caution suggested by the the surveys this week. Only the Hang Seng and CSI managed to post a gain on the week. On the quarter the Asian markets posted the best returns, followed by those in the US and Switzerland. Rising interest rates took its toll on the Bloomberg investment grade indices this week; only the High Yield index managed to post a positive return for the week. For the second quarter, all three bond indices posted positive results. Valuations remain high historically, but, at 17.4 times forward earnings, the S&P 500 closed the quarter a tick less rich than the close of the 1st quarter. Equity Indices % Change | Price | Week | QTD | YTD | '08-'16 | | 06 /30/ 17 | 06 /23/ 17 | 03 /31/ 17 | 12/30/16 | 12/31/08 | Dow Jones Industrials | 21,350 | -0.2% | 3.3% | 8.0% | 125.2% | S&P 500 Index | 2,423 | -0.6% | 2.6% | 8.2% | 147.9% | Nasdaq | 6,140 | -2.0% | 3.9% | 14.1% | 241.3% | S&P/TSX Composite | 15,182 | -0.9% | -2.5% | -0.7% | 70.1% | FTSE 100 Index | 7,313 | -1.5% | -0.1% | 2.4% | 61.1% | CAC 40 Index | 5,121 | -2.8% | -0.0% | 5.3% | 51.1% | DAX Index | 12,325 | -3.2% | 0.1% | 7.4% | 138.7% | Swiss Market Index | 8,907 | -1.4% | 2.9% | 8.4% | 48.5% | Nikkei 225 Index | 20,033 | -0.5% | 5.9% | 4.8% | 115.7% | HK Hang Seng Index | 25,765 | 0.4% | 6.9% | 17.1% | 52.9% | Shanghai CSI 300 | 3667 | 1.2% | 6.1% | 10.8% | 82.1% | Bond Indices % Total Return | | | | | | Bloomberg Treasury Index | 126.5 | -0.7% | 1.2% | 1.9% | 19.5% | Bloomberg Corporate Index | 149.1 | -0.6% | 2.5% | 3.8% | 72.1% | Bloomberg High Yield Index | 178.4 | 0.3% | 2.1% | 5.1% | 167.4% | S&P 500 Valuation | | | | | | Factset forward Earnings | $138.96 | | $134.91 | $132.79 | 5-Year Ave | % Change in Earnings | | | 3.0% | 4.6% | 15.3 | | | | | | 10-Year Ave | Price/Earnings Ratio | 17.4 | | 17.5 | 16.9 | 14.0 |
Data Source: Bloomberg app for the Iphone; Earning Estimates from Factset |
Bond Yields and Spreads: Government Bond yields higher on the week, possibly reflecting concerns about inflationary pressures and possible action by the Central Bankers. The results for the quarter were mixed as the US and French bond yields fell while others rose. Credit spreads narrowed on the week, for the quarter, and year-to-date. The TIPS spread rose 7 bps on the week, but is 23 basis points narrower than it was at the end of March; this would suggest a re-emergence of concerns for inflationary pressures. Government Bonds | Bond Yields (%) | bp chg | QTD | YTD | '08-'16 | | 06 /30/ 17 | 06 /23/ 17 | 03 /31/ 17 | 12/30/16 | 12/31/08 | UST 2-Year | 1.38 | 4 | 13 | 19 | 42 | UST 10-Year | 2.30 | 16 | -9 | -14 | 23 | US TIP 10-Year | 0.54 | 9 | 14 | 8 | -163 | UST 30-Year | 2.83 | 11 | -18 | -24 | 39 | Canadian 10-Year | 1.77 | 30 | 15 | 6 | -97 | UK 10-Year | 1.25 | 22 | 11 | 2 | -179 | French 10-Year | 0.81 | 21 | -15 | 13 | -273 | German 10-Year | 0.46 | 21 | 14 | 26 | -275 | Swiss 10-Year | -0.07 | 14 | 8 | 19 | -236 | Japan 10-Year | 0.07 | 2 | 1 | 3 | -113 | Bloomberg Credit Spreads | | bp chg | bp chg | bp chg | bp chg | Corp OAS BUSC | 112 | -3 | -12 | -16 | -445 | HY OAS BUHY | 376 | -15 | -18 | -53 | -1374 | Rates | | bp chg | bp chg | bp chg | bp chg | US Mort 30-yr % | 3.85 | 30 | -17 | -24 | -117 | Spreads | | | | | | 10-Year TIPS Spread | 1.76 | 7 | -23 | -22 | 185 | Yield Curve (2's to 10's) | 0.92 | 12 | -22 | -33 | -20 | Yield Curve (10's to 30's) | 0.53 | -5 | -9 | -10 | 17 | Yield Curve (2's to 30's) | 1.45 | 7 | -31 | -43 | -3 |
Data Source: Bloomberg app for the Iphone |
Currency and Commodity Markets: The US dollar rose against the Yen, but fell against the Pound, Euro, Loonie, and RMB on the week and quarter-to-date. Since year end, the US dollar has slipped against each of the currencies in the table. Energy commodity prices rebounded this week, but not enough to erase this quarter's decline. Metals commodity prices fell on the week and for the 2nd quarter. Corn prices also rebounded and was able to post a gain for the quarter- and year-to-date. Currencies vs $ | Closing | Week | QTD | YTD | '08-'16 | | 06 /30/ 17 | 06 /23/ 17 | 03 /31/ 17 | 12 /30/ 16 | 12 /31/ 08 | Yen | 88.91 | -1.1% | -1.0% | 4.0% | -22.5% | British Pound | 1.30 | 2.4% | 3.8% | 5.7% | -15.5% | Euro | 1.14 | 2.0% | 7.2% | 8.6% | -24.7% | Canadian Dollar | 77.11 | 2.3% | 2.7% | 3.6% | -9.5% | China Renminbi | 14.75 | 0.8% | 1.6% | 2.4% | -1.6% | Commodities | | | | | | WTI | $46.22 | 7.5% | -9.0% | -14.2% | 20.7% | Brent Crude | $48.85 | 6.9% | -7.5% | -14.0% | 58.6% | Natural Gas | $2.95 | 0.8% | -7.5% | -21.0% | -35.6% | Spot Gold | $1241 | -1.3% | -0.7% | 7.8% | 32.4% | Spot Silver | $16.61 | -0.6% | -9.1% | 4.2% | 40.7% | CBOT Corn | $387.75 | 6.1% | 6.5% | 10.2% | -2.1% | Spreads | | | | | | Brent-WTI | $2.63 | $2.67 | $2.03 | $2.98 | -$8.78 |
Data Source: Bloomberg app for the Iphone |
Equity Index Gains in US dollar terms: The equity table above shows the percent change of different stock indices in terms of its local currency. To calculate the return to the US dollar investor one must combine the change of each index with the change in the applicable currency. The following table shows the 5-day, quarter-to-date and year-to-date results of investments made in each index in US dollar terms: Return to USD Investor | | % Chg | QTD | YTD | | 06 /30/ 17 | since: | 06 /23/ 17 | 03 /31/ 17 | 12/30/16 | '08-'16 | S&P 500 Index: | USD | -0.6% | 2.6% | 8.2% | 147.9% | Nikkei 225 Index: | Yen | -1.5% | 4.9% | 9.0% | 67.3% | FTSE 100 Index: | Pound | 0.9% | 3.6% | 8.2% | 36.0% | DAX Index: | Euro | -1.2% | 7.3% | 16.6% | 79.7% | CAC 40 Index: | Euro | -0.8% | 7.2% | 14.4% | 13.7% | S&P/TSX Composite: | CAD | 1.4% | 0.1% | 2.9% | 54.0% | Shanghai CSI 300: | Yuan | 2.0% | 7.8% | 13.5% | 82.1% |
For US dollar investors, the FTSE, TSX, and CSI generated better returns than the S&P 500 this week. |
Disclaimer: The views discussed herein are exclusively those of John W. Davidson. These views are not meant as investment advice, and are subject to change. Information contained herein is derived from sources believed to be reliable, however, Mr. Davidson does not represent that the information is complete or accurate and therefore, should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information purposes only, and does not pertain to specific investment objectives, the financial situation or the particular needs of any specific person or investor who might receive this report. Investors should seek financial advice regarding the appropriateness of investing in any security or utilizing any investment strategy discussed or recommended in this report, and should understand that statements regarding future investment prospects may not be realized. No part of this report may be reproduced in any manner without the express written permission of Mr. John W. Davidson. Should you wish to be removed from this distribution please utilize the Safe Unsubscribe link below. |
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