Weekly Market Commentary August 7, 2017

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Generally solid economic data and earnings are continuing to propel the bullish momentum. The Dow Jones touched and crossed the 22,000 level mid-week while the S&P 500 fell just short of last week’s all-time record. Most global indices were up as well on the positive data. The S&P 500 edged up 0.2% and the MSCI ACWI climbed 0.4% and set a record high early in the week.  The BarCap U.S. Aggregate Bond Index rose 0.2%.The monthly U.S. jobs report provided broadly encouraging news. The economy added 209,000 jobs, which was a strong number and bested expectations of 180,000 new jobs. Other data points were positive as well.

For July, Markit global manufacturing PMI came in at 52.7 up from 52.6 in June. Growth was led by the Eurozone while most Asian economies, except China, continued to struggle. In the U.S., the index rose to 53.2 from 52 in June. We note, while new orders were increasing at a faster rate, input prices also continue to rise at a faster pace. Manufacturers seem to be benefiting from improving demand conditions and lower risk averseness.

What are we reading?

Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links:

U.S. Hiring Maintains Strong Pace

The U.S. jobs reports produced a strong set of numbers. Most importantly, non-farm payrolls rose by 209,000, beating expectations of 180,000. The secondary data points were also positive. The unemployment rate dropped to 4.3%. The decline in the unemployment rate was impressive as the participation rate rose 0.1%, indicating more people sought employment. Hourly earnings rose 2.5%. The data suggests the U.S. economy continues to grow at a moderate pace.

Global Manufacturing PMI at three-month high in July

The global manufacturing sector registered a month of improved business conditions in July. Although output growth slowed to a 10-month low, the pace of expansion in new orders strengthened. Additionally, the rate of expansion picked up to the fastest since April but remained milder than at the start of the year.

China Shuffles Its Debt Around

China seems serious about deleveraging but the reality looks different. New total social financing grew by 14.5% (vs 10.8% y-o-y) in the first half of 2017, roughly 3% faster than GDP growth. What seems to be changing is the borrower. While loans to non-financial grew a modest 8%, total loans to households are up 24%.

Fun Story of the Week

In the week where select football players are enshrined in the NFL Hall of Fame, we are nominating two nominees to the Lady Jane Grey Hall of Short-Term Employment. Grey’s nine-day reign as queen of England in 1553 is known mostly for its brevity. Our first nominee is Anthony Scaramucci, who was named White House communications director on July 21, assumed the role on July 25 and was fired July 31. As communications director, he will best be remembered for his profanity-laced interview criticizing his new colleagues. Perhaps the initial vetting process wasn’t effective.

Pitcher Jaime Garcia, our second nominee, tied a 122-year-old record by making three consecutive starts for three different teams. After starting the year with the Atlanta Braves, on July 24 Garcia was dealt to the Minnesota Twins to bolster their playoff chances. While he won his only start, the Twins slumped and the completion soared. As the trade deadline approached, the Twins dealt him to the Yankees just six days after acquiring him. Interestingly, Scaramucci’s White House career and Garcia’s time as a Twin overlapped for five of their six days on the job.



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