HBD America

Sitting, Waiting, Wishing

Due to the holiday, it’s been a fairly slow week for the markets and most Americans. We started the week with ISM’s June manufacturing index indicating US manufacturers grew at the slowest pace in over two years. Tbh this is not surprising given results from the Philly and New York Feds’ surveys measuring similar activity. The index dropped to 51.7 in June, only 1.7 points away from contractionary territory. The services side of the economy is still showing strength (albeit at the lowest levels in almost two years) with the services index coming in at 55.1 for June. 

Moral of the story: Tariffs on Chinese goods and the threat of tariffs on Mexican goods are disrupting supply chains and are delaying decision-making given the inability to forecast accurately. At this point, just waiting on the world to change (to be sung in John Mayer’s voice). 

Think Again 

Recent employment numbers have been fairly lackluster and the May employment report was straight up scary. But this week ended with last month’s data showing 224k new jobs created in June, far outpacing economists’ expectations. Strength in job creation was quite widespread with gains in basically every industry except, of course, for retailThis beat, however, comes in tandem with the initial 75k increase in May being revised further downward to 72k (ouch). 

Moral of the story: While new job growth has slowed from the 223k monthly average in 2018 to the 172k monthly average so far in 2019, we’re still sitting at almost record-low unemployment. This report, in addition to the lack of bad news from the G20 Summit on China trade relations, lowers the chances of an interest rate cut from the Fed in July. Personally, I’ll chalk this up as a great birthday present for this country but the stock market has been waiting for this rate cut in July and was not pleased, closing lower on Friday after this report.