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Overview: Stocks were mixed across the globe last week with emerging markets (MSCI EM) leading the way with a positive 0.8% return, while U.S. stocks closed lower. Markets lost momentum late in the week following mixed earnings results and Iran’s capture of a British tanker in the Strait of Hormuz. Investors continue to speculate on Federal Reserve interest rate changes at its July 30-31 meeting with the markets now pricing in a 75% probability of a 25 basis points (bps) cut and a 25% chance of a 50 bp cut at next week’s meeting. Interest rates have settled into a range ahead of the meeting with the 2-year and 10-year Treasuries trading at 1.81% and 2.05% respectively. Using this 2-year 1.81% as a proxy, markets are already pricing in nearly 3 rate cuts, given the current funds rate of 2.50%.

This week is a banner period for company earnings with 25% of the S&P 500 companies reporting quarterly results. According to JP Morgan, 72 companies (22.5% of market cap) having reported so far. Seventy-eight percent of companies have beaten on earnings, while 42% have beaten on revenue. JP Morgan stated, “Slower global growth, lower oil prices, a stronger USD, margin pressures and fading effects from tax reform will continue to weigh on earnings this quarter”. It will be a busy week for the economic calendar, with data on housing, durable goods, and trade. The U.S. GDP will be reported on Friday, with the economy expected to grow 1.9% for the second quarter.

This communication is for informational purposes only. It is not intended as investment advice or an offer or solicitation for the purchase or sale of any financial instrument.

Indices are unmanaged, represent past performance, do not incur fees or expenses, and cannot be invested into directly. Past performance is no guarantee of future results. 2651765