Performance for Week Ending 8/4/17:
The Dow Jones Industrial Average (Dow) gained 1.2%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) finished little changed, the Standard & Poor’s 500 Index (S&P 500) finished up 0.19% and the Nasdaq Composite Index (NASDAQ) dipped by 0.36%. Sector performance was negative with 7 of the 11 S&P sector groups finishing lower. The Energy sector (-1.02%) was the worst performer while Financials (+1.76%) led on the upside.
||Closing Price 8/4/17
||Percentage Change for Week Ending 8/4/17
||Year-to-Date Percentage Change Through 8/4/17
*See below for Index Definitions
MARKET OBSERVATIONS: 7/31/2017 – 8/4/2017
The S&P 500 finished the week modestly higher however the real star was the Dow Jones Industrial Average. The Dow has posted gains in nine consecutive sessions and finished the week above the 22K level for the first time ever. The drivers of this week’s gains include the strong second quarter earnings season, confidence the US economy remains on firm footing, the solid payroll numbers, and the likelihood that the rate environment will remain supportive of risk assets for the foreseeable future.
Q2 Earnings Season: Through Friday, over 80 percent of the companies in the S&P 500 have reported second quarter results with 77 percent beating profit projections and 68 percent topping revenue expectations. Aggregate S&P 500 earnings are tracking at a very solid 10.5% year-over-year pace. If the current growth rate is maintained, it would mark the second consecutive quarter of double digit earnings growth.
Payroll Report: The Labor Department reported that non-farm payrolls during the month of July expanded by 209K, solidly better than the 180K expected by economists. The prior month’s payroll data was also upwardly revised to 231K from the initial estimate of 222K. The unemployment rate dipped to 4.3%, matching the 16-year low reached in May. Average hourly earnings gained 0.3% and are up 2.5% on a year-over-year basis. All in all a solid report that suggests the labor market remains healthy.
Market View: We believe the bull market remains intact. However elevated valuation levels and unfavorable seasonals during the late-Summer/early-Fall months, raise the odds of a near term pullback. The “Goldilocks” environment (not too hot, not too cold as far as economic growth and inflation are concerned) should help limit the downside risk. From a macro point of view, the world is enjoying a period of synchronized global growth, which has resulted in a favorable turn in the earnings environment. In addition, valuation levels—while elevated—are far from extreme. If the market were to stage a pullback in the coming months, it would be viewed as healthy and corrective in nature and not the start of a broader leg lower - in other words, a good buying opportunity, especially for longer-term investors.
The Week Ahead: Earnings season will continue to wind down with only 33 members of the S&P 500 scheduled to report. Included in this group is one Dow component Walt Disney Co. which will report on Tuesday. Economic reports of interest this week include; the June JOLTS report, the July producer price index (PPI) and the July consumer price index (CPI). The Fed speaking calendar will be relatively light with only three officials scheduled to make public appearances.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.
Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Indices do not include any expenses, fees, or sales charges, which would lower performance. Indices are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.
The individual companies mentioned in this piece were for informational purposes only and should not be viewed as recommendations.
The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. This document contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Information in this report does not pertain to any investment product and is not a solicitation for any product. This material has been prepared using sources of information generally believed to be reliable. No representation can be made as to its accuracy.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
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*Assets under management is as of 09.30.2018 and includes leverage of $11.8bn.
Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
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