I hope you are enjoying the dog days of summer! The month of July was yet another solid month, with the S&P 500 tacking on 2.28%, the Nasdaq 100 adding 2.78%, and the Dow Jones Industrial Average moving higher by 1.25%.

Healthcare, utilities, and real estate led the way in July, with added strength in information technology, communication services, and consumer staples. Energy stocks and financials lagged in the month of July. The month was marked by high consumer prices, a somewhat more dovish Fed, and higher than expected retail sales.

At the end of the month, we saw GDP data that missed expectations, although the broader markets did not seem to mind.

Inflation Remains Key Theme

Consumer Price Index (CPI) data has continued to show sharp increases in prices. While the markets have reacted to higher inflation data with short-lived downward price spats, the quickness of the rebounds has remained very impressive. It’s possible that inflation has found its way into stock prices.

Equity markets seemingly anticipated the continued rise of CPI readings and have even shown some immunity to them. The broader markets did exhibit some disdain for the higher CPI data published on July 13th. However, the market ultimately found its footing near its 50-day moving average. The resiliency has been astounding as buyers have stood by to buy these dips.

Earnings Season Unfolds

In late July, all attention shifted to earnings releases of the tech giants. Many tech behemoths, including Facebook, Google, Microsoft, and Apple, released earnings that beat analysts’ expectations. But without huge blowout data, their stocks were sold and sent lower anyway. The broader market reactions that we have been seeing lately have been remarkably steady, however.

Inflation vs. Earnings vs. Market Expectations

While inflation and Federal Open Market Committee guidance on interest rates remain on the minds of market participants, the broader markets have shaken off hawkish Fed guidance and higher inflationary prints. Will this last? The Fed had a more dovish tone in July. For now, we will look forward to the August data releases.

August & September Seasonality

As we enter the seasonally softer time of year, it is wise to recognize the potential for market pullbacks. Even though the broader market averages have shown signs of strength amid potentially cautious economic data, the possibility exists that the markets could experience a meaningful pullback in the coming months.

Market timing is difficult to achieve; that’s why we stress the overall importance of investing over the longer term. However, with careful research and planning, buying on market pullbacks could make sense for some investors’ longer-term objectives.

It has continued to be a great summer for U.S. equity markets. I would love to hear from you on how things are going and if your priorities or objectives have shifted since we last spoke.

As always, please feel free to contact me at any time if you have questions or need anything 631-393-2888.