Market News – Week of July 3rd, 2017

END OF A STRONG FIRST HALF OF THE YEAR FOR STOCKS:

All but four of the 30 major stock market indices representing the world’s biggest stock markets have risen this year, something we have not seen since 2009 (when we had nowhere to go but up).  Why?  Most attribute this to strong global corporate earnings (double digit annual growth in U.S. Europe and most of Asia), improving economies, and supportive central banks.  In addition to growth, markets have also been calm as measures of volatility are also quite low.  Will this continue or is it time to be prepared for choppy seas ahead?  For the week, the S&P 500* decreased 0.61% (up 8.24% for the year).  The MSCI All Country X US* increased 0.14% (up 13.08% for the year).  The Barclays Global Aggregate Bond Index* decreased by 0.12% (up 4.58% for the year).  The HFRX Global Hedge Fund Index* decreased 0.06% (up 2.69% for the year).

THE LOSERS:

Amidst a global market environment of growth, which countries’ stock markets lost ground?  Canada, Israel, China and Russia.

BIRTHS TRAILING OFF AGAIN:

Births in the U.S. picked up in 2013 and 2014, but declined again in 2015 and 2016.  Women are waiting longer, on average, to have babies.  But due to a large surge of women entering the 25-34 age group over the next several years, we should see a bit of a baby boom.  Below is the births per year statistic for the past century or so.

The chart below shows that the 30-somethings are leading the way.  Those in the 30-34 and 35-39 ages groups have been birthing children at a higher and higher rate while twenty-somethings have slightly trailed off, and teen birth rates are slowing.

EURO INFLATION:

As you know, central banks in the U.S. and elsewhere have been trying to engineer fiscal policy to encourage a target range of inflation generally at about 2%.  Inflation has remained stubbornly low (and wage growth has been stagnant) for many years now.  In Europe, the inflation rate slowed to 1.3% from 1.4% in May.  This is still considered progress by many as any inflation at all in Europe is considered an improvement from the flat and potentially deflationary environment the European Central Bank has been fighting.  Dropping oil prices will likely pull down these numbers in the months to come.

STRUGGLING STATE LEGISLATURES:

All but four states started their fiscal year on Saturday and the legislatures of 11 of those states (including Delaware, New Jersey, Illinois and Connecticut) had yet to finalize a budget late in the week.  Despite being eight years into a recovery many states are on an unsusually rocky fiscal road.  Illinois is struggling the most as it tries to deal with a $15 billion backlong in unpaid bills (the dreaded word “default” has been uttered).

References:

BIRTHS TRAILING OFF AGAIN: http://www.calculatedriskblog.com/2017/06/us-births-decreased-in-2016-women-30-34.html
EURO INFLATION: https://www.irishtimes.com/business/economy/underlying-euro-area-inflation-ticks-up-in-june-1.3138930
END OF A STRONG FIRST HALF OF THE YEAR FOR STOCKS:  https://www.wsj.com/articles/stocks-strongest-first-half-in-years-worries-investors-1498827332
THE LOSERS: https://www.wsj.com/articles/stocks-strongest-first-half-in-years-worries-investors-1498827332
STRUGGLING STATE LEGISLATURES:  http://www.lehighvalleylive.com/news/index.ssf/2017/06/house_senate_send_pennsylvania.html