Welcome to our site

July 2024

Market Update

(all values as of 10.31.2025)

Stock Indices:

Dow Jones	47,562
S&P 500	6,840
Nasdaq	23,724

Bond Sector Yields:

2 Yr Treasury	3.60%
10 Yr Treasury	4.11%
10 Yr Municipal	2.73%
High Yield	6.53%

YTD Market Returns:

Dow Jones	11.80%
S&P 500	16.30%
Nasdaq	22.86%
MSCI-EAFE	23.69%
MSCI-Europe	25.44%
MSCI-Pacific	25.83%
MSCI-Emg Mkt	30.32%

US Agg Bond	6.80%
US Corp Bond	7.29%
US Gov’t Bond	6.51%

Commodity Prices:

Gold	4,013
Silver	48.25
Oil (WTI)	60.88

Currencies:

Dollar / Euro	1.15
Dollar / Pound	1.31
Yen / Dollar	153.64
Canadian /Dollar	0.71

Macro Overview

In June, market activity was influenced by election dynamics and economic data, as equities and bonds reacted to uncertainties regarding future fiscal policy and the timing of potential Federal Reserve rate cuts.

The second quarter ended with mixed results for equity indices. The S&P 500 Index and the Nasdaq Composite Index outperformed the Dow Jones Industrial Index. Technology-related companies saw gains during the quarter, while energy and industrial sectors lagged behind.

Major banks underwent a stress test conducted by the Federal Reserve to assess their financial stability and resilience to severe economic and financial shocks. All 31 banks tested remained above their minimum capital requirements in a hypothetical severe recession scenario, indicating they are well-positioned to endure a severe downturn and continue lending.

The latest employment report showed a rise in the unemployment rate to 4.1%, prompting the Federal Reserve to consider lowering rates sooner rather than later. Companies have been slowing their hiring rates and increasing layoffs across various industries. Economists interpret these trends as signs of decelerating economic activity. Some analysts predict that the Fed might start reducing rates as early as September if economic data continues to support slowing growth.

In early July, European central bankers, academics, financial market representatives, and journalists gathered in Sintra, Portugal, to discuss current policy issues and long-term economic perspectives affecting European countries and the EU. Key topics included persistent inflationary pressures across Europe, the ongoing conflict stemming from the Russian invasion of Ukraine, and regional employment challenges. Discussions also addressed the 5.4% year-over-year decline in industrial production in the EU from February 2023 to February 2024, highlighting a slowdown in industrial activity.

Despite a decline in auto prices due to easing supply chains and ample inventory, financing costs for new autos remained relatively high in June. The average monthly payment for a new auto loan reached a record high of $740 this quarter, dampening consumer demand.

A Federal Reserve model evaluating residential home values found that homes are now 25% overvalued, just below the 28% peak in 2007. Using the Labor Department’s measure of rent, homes are 19% overvalued according to private market rent measures. The Fed tracks the S&P CoreLogic Case-Shiller U.S. national home price index, which has risen 51% since the end of 2019.

(Sources: U.S. Treasury, Federal Reserve, S&P, Eurostat, Labor Dept., ECB, Dow Jones, Nasdaq, Case-Schiller)

average amount for a new car loan has fallen to $38,739

Stock Indices Not In Sync – Domestic Equity Overview

The second quarter saw varying performance across the S&P 500 Index, as certain sectors outperformed while others delivered negative returns. Technologies, utilities and communication services saw the largest gains for the quarter, while materials, industrials and energy experienced pullbacks. The S&P 500 Index was up 4.28% for the second quarter, while the Dow Jones Industrial Average posted a -1.73% decrease, and the Nasdaq Composite Index was up 8.5%.

Analysts are noting a growing disparity among the major equity indices, indicating a market with increasingly concentrated performance rather than broad participation.

(Sources: S&P, Dow Jones, Nasdaq, Bloomberg)

Rates Begin To Stabilize – Fixed Income Update

Recent economic data revealed a slowing environment in the second quarter, leading to a stabilization in rates and indicating a potential downward trend in the coming months. The yield on the benchmark 10-year Treasury bond rose to 4.36% at the end of June, up slightly from 4.33% at the beginning of the quarter on April 1st. Despite this stabilization, consumer loan rates remain relatively elevated, putting pressure on purchases of homes and cars.

(Source: U.S. Treasury)

Average Auto Loan Amounts Head Lower – Consumer Finance

As auto sales have declined in recent months, the prices for automobiles and light trucks have also decreased. According to recent data from the Federal Reserve Bank of St. Louis, the average amount financed for a new car loan has dropped to $38,739, down from $40,155 in September 2022.

Nationwide, automobile dealerships have accumulated large inventories of cars and trucks, which they have been unable to sell quickly. During the pandemic, disruptions in supply chains and the limited availability of various auto components drove up prices for new and used cars.

Now that supply chains have been restored and product availability is back on track, pent-up demand has been mitigated, resulting in large inventories and falling prices. Despite the price drop, consumers are still facing higher-than-average auto payments due to high interest rates. Unless and until rates decrease, consumers may continue to hesitate to buy automobiles, leaving dealers with growing inventories of unsold cars.

(Source: Federal Reserve Bank of St. Louis)

S&P CoreLogic Case-Shiller U.S. home price index is up 51% since the end of 2019

Some Question Traditional Stock Market Indicator – Equity Analysis

The Dow Theory has been a stock market indicator for over 100 years, with a particular focus on transportation. It originated from the simple idea that the Dow Transportation Index (DJTA) follows the Dow Jones Industrial Index (DJIA). This is based on the notion that the goods produced by the 30 companies in the DJIA are eventually shipped and transported to consumers and stores worldwide.

For decades, market analysts have closely monitored discrepancies between the two indices, seeking to identify lags or disconnects. Recently, a disparity has appeared, which could be a sign of future trends. According to the Dow Theory, the performance of the transportation sector (DJTA) should confirm the trends seen in the industrial sector (DJIA). If the two indices diverge, it may signal potential economic issues. For example, if the DJIA is rising while the DJTA is falling, it could indicate that goods are being produced but not transported at the same rate, suggesting a potential slowdown in economic activity.

As of May 29, 2024, the DJTA was at 14,781.56, down by 213.56 points or 1.42% from the previous close. This reflects a year-to-date return of -7.03% and a one-year return of 6.32%. In contrast, the DJIA had a year-to-date return of -2% and a one-year return of 16.16%. From a historical perspective, this disparity in returns is greater than usual.

Various factors can influence the performance of the Transportation Index, such as elevated fuel costs, weather conditions, or logistical issues. Additionally, a more recent factor is the fact that the U.S. economy has shifted towards a more service-oriented model, with intangible products like software platforms not requiring physical transportation. Consequently, the reasons behind disparities have become more subjective as analysts interpret varying causes.

(Sources: Dow Jones, Bloomberg)

Federal Reserve Says Homes Are 25% Overvalued – Housing Market Review

In addition to monitoring inflationary pressures and wage growth, the Federal Reserve also tracks asset valuations to identify excessive increases. The Fed’s Financial Stability Report evaluates the stability of the U.S. financial system by analyzing asset valuations, business and household borrowings, leverage, and funding risks.

A model used to value residential homes has found that they are currently 25% overvalued, just below the 28% peak in 2007. According to the Labor Department’s measure of rent, home prices are 19% overvalued based on private market rent measures. The Federal Reserve monitors the S&P CoreLogic Case-Shiller U.S. national home price index, which tracks home prices nationwide and has risen 51% since the end of 2019, an extraordinary increase compared to historical data. Another important factor is the cost of renting versus owning. The Labor Department reports that owner-equivalent rent has increased by 24% since 2019, indicating that the cost of purchasing a home has risen more than the cost of renting over the same period. (Source: Federal Reserve Board of Governors)

The banks tested under the Federal Reserve program included 31 banks

China Is Exporting More & Making Cheap Products Cheaper – Global Trade Update

China is flooding global markets, including the U.S., with cheap exports across various industries. Chinese factories are producing far more goods than the domestic market can absorb, resulting in a surplus being exported at low prices to markets in the U.S. and Europe. This overcapacity issue affects multiple sectors, including steel, electric vehicles, solar panels, computer chips, and other manufactured products, as China has rapidly expanded its production capabilities.

China’s global trade surplus in goods soared to around $900 billion in 2022, more than double the pre-pandemic level, highlighting the scale of oversupply. Factors such as China’s slowing economy, prolonged property slump, and shifts in consumer spending patterns have exacerbated the overcapacity problem.

The U.S., European Union, and other trading partners accuse China of unfair trade practices, including subsidies, intellectual property theft, and forced technology transfers, which have fueled the overcapacity trend. The Chinese government has been subsidizing companies to export more competitively and aggressively.

In response, the current U.S. administration announced major tariff hikes on $18 billion worth of Chinese imports, including electric vehicles, solar cells, semiconductors, and some medical supplies, to counter the deluge of subsidized Chinese products. The previous administration imposed tariffs of 25% on $300 billion worth of Chinese goods to curb the import of such products from China. (Sources: IMF, whitehouse.gov)

Banks Get A Stress Test & Pass – Banking Sector Review

In June, the Federal Reserve reported that its annual bank stress test results showed the largest U.S. banks and lenders have sufficient capital to withstand an economic catastrophe, although it noted growing pockets of risk on some bank balance sheets.

The Fed noted rising bank credit card balances and higher delinquency rates, which have led to higher projected credit card losses. The report also highlighted that bank corporate credit card portfolios are becoming riskier, with higher expenses and lower fee income contributing to these losses. The stress tests included 31 banks, ranging from the largest U.S. banks to midsize regional banks and lenders. A primary issue among smaller and midsize regional banks is their commercial real estate exposure, which has become a growing concern.

This year’s hypothetical scenario was broadly comparable to the one in 2023 but included additional stressors such as a severe global recession, a 40% decline in commercial real estate prices, a 36% drop in home values, and the unemployment rate rising to 10%. (Source: Federal Reserve Board of Governors)

Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.