Rates Uncertain Until Fed Decides On Further Cuts – Fixed Income Update

Fixed income indices had a mixed month, with Treasuries experiencing fluctuating long-term yields, reflecting investor concerns over inflation and economic growth. Markets reacted to poorer than expected employment data released by the Bureau of Labor Statistics (BLS) by sending bond prices higher and yields lower at the end of July.

Interestingly enough, the weak jobs data release actually helped the Fed as markets drove bond yields lower without the Fed having to take any action. Employment data is critical for the direction of bond yields since a weakening jobs market is indicative of slowing consumer expenditures and alleviating inflation. The rate on a 30-year fixed conforming mortgage fell to 6.72% on July 31st, down from 6.91% at the beginning of the year. Any reduction by the Fed is expected to help buoy the housing market with lower mortgage rates. (Sources: FreddieMac, U.S. Treasury, BLS)

Equities Navigate Tariffs In July – Domestic Stock Overview

Despite ongoing trade tensions and macroeconomic uncertainty, domestic equities maintained on upward momentum in July, with the S&P 500 index and Nasdaq increasing in July. Propelled by strong corporate earnings and renewed consumer sentiment, equities were resilient to ongoing trade and data headwinds. Information technology, utilities and industrials were the leading sectors in July, while other sectors were mixed.

The weak employment data release was of concern for the stock market since less companies are hiring and more workers are finding it increasingly difficult to land a job. Such labor market dynamics can slow economic growth and curtail inflationary pressures. (Sources: Bloomberg, S&P)

How Autos Have Become More Fuel Efficient Over The Decades – Auto Industry Overview

As technological advances have been applied to the auto industry, cars have become more efficient and electronically sensible. Technology has been able to increase horse-power while also decreasing fuel consumption over the past few decades.

Smaller, more efficient 4 cylinder engines now produce the same amount of power as earlier V8 engines from the 70s and 80s that were known as “fuel hogs”. Data collected by the U.S. Energy Information Administration as early as 1949, has shown a gradual decrease in fuel consumption per vehicle, translating into higher miles per gallon (MPG). The average vehicle in 1949 achieved roughly 13 MPG, while the average vehicle as of the most recent data was 18.4 MPG. (Sources: U.S. Energy Information Administration)

Artificial Intelligence (AI) Is Elevating The Cost of Electricity – Energy Sector Update

As the expansion and proliferation of Artificial Intelligence (AI) continues throughout the economy, the demand for electricity is also intensifying. AI is essentially fields of servers packed with incredibly fast semiconductor processors that demand enormous amounts of energy in order to calculate and process data. These server facilities are known as data centers which are usually located in rural areas such as deserts and harsh weather regions. Demand for power by these data centers is directly competing with demand by consumers across the country, leading to rising utility bills.

As the nation’s power grid struggles to provide ample energy for consumers, data centers, and factories, the need to expand and build new power plants has risen to levels never seen before. The average cost of electricity per kilowatt-hour in a U.S. city began to rise above historical trends in 2021 when significant expansion of the data center industry began, including a large number of new facilities coming online that same year. The building and opening of new data centers has continued ever since, with the average data center consuming almost as much power as a small city. Data centers accounted for roughly 4.4% of total electricity consumption in 2023, with projections estimating a rise to 6.7% to 12% by 2028, according to the U.S. Department of Energy. (Sources: U.S. Dept. of Energy, Federal Reserve Bank of St. Louis)

What The European Union Exports To The U.S. – International Trade

The United States imports a wide array of materials and finished products from Europe with the total value of European Union (E.U.) imports into the U.S. totaling over $570 billion in 2024. The most significant imports from Europe to the U.S. are pharmaceuticals and medical products, accounting for roughly $127 billion while automobiles and automotive components constitute about $57 billion in exports to the U.S. Other significant exports to the U.S. include machinery, optical products, electrical components, and organic chemicals.

Trade between the U.S. and the European Union are distinctive from other countries as the E.U. is made up of 27 countries with different economies and political leaders. All trade negotiations with the E.U. are accomplished with the President of the European Commission, who represents all 27 countries for the interests of the E.U. as a whole.

Since labor costs in the E.U. can be restrictive for certain manufacturers, several European auto companies have actually initiated production of autos in the U.S. over the past few years. Part of the current negotiation process does include incentivizing additional transition of production and manufacture to the U.S. (Sources: EuroStat, U.S. Dept. of Commerce)