Market Update: Monday, July 16, 2018

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Daily Insights

  • Retail sales gain in June. Retail sales grew for a fifth straight month, rising 0.5% in June to match consensus expectations. Initial figures for May reported last month were revised higher, from 0.8% to 1.3% to mark the largest growth rate since September 2017. Eight of 13 sub-groups within retail sales gained month over month, confirming a broad-based pickup in consumer activity. However, while consistent gains in retail sales show the health of the consumer amid a strengthening economy, control-group prices, which are used to calculate GDP, painted a somewhat less encouraging picture, remaining unchanged month over month at 0.4% (matching consensus expectations). Despite stagnant control-group prices, U.S. consumer demand remains robust as spending continues to accelerate following the first quarter slowdown.

  • Weekly Economic Commentary: Global growth likely to remain steady despite risks from trade, central banks. Coordinated global growth in 2017 helped produce the best year for overall global growth since 2011. We expect the global economy to grow at a similar 3.8% pace in 2018, with accelerating growth in the U.S. offsetting slower but still solid growth in Japan, Europe, and emerging markets. Trade and the gradual removal of central bank support remain risks, but we believe that supportive fiscal policy, in the U.S. in particular, will more than compensate and help keep the global economy on a steady path.

  • Weekly Market Commentary: The rally can continue. We expect strong earnings to remain the key driver of stock gains in 2018, thanks in large part to the benefits of the new tax law. Although we do expect volatility to increase, in the context of steady economic growth and strong corporate profits, we see the potential for further stock gains in the second half of 2018. Small caps, value, cyclical, and emerging markets are our favorite areas for potential equity gains the rest of this year.

  • Week ahead. Looking ahead, a variety of economic data is due out in the U.S. next week, highlighted by the Federal Reserve’s Beige Book on Wednesday and followed by the leading economic indicators on Thursday. The foreign docket includes inflation readings out of the Eurozone and Japan, as well as China’s second-quarter gross domestic product figures. View all the key events on our Weekly Global Economic & Policy Calendar.

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Monday

Tuesday

Wednesday

Thursday

  • Conference Board Leading Index (LEI) MoM
  • UK: Retail Sales (Jun)
  • Japan: CPI (Jun)

Friday

  • Japan: All Industry Activity Index (May)

 

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. The prices of small cap stocks are generally more volatile than large cap stocks. Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All performance referenced is historical and is no guarantee of future results.

This research material has been prepared by LPL Financial LLC.

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Index data obtained via FactSet

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