July 2023 in Review

by Daniel Zeigler, CFP®, CMFC®, Senior Portfolio Manager

Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today I just wanted to take a few minutes to give you an update on the markets for the month of July.

Market Returns for July:

Stocks ended the month with robust gains as the S&P 500 & Nasdaq Composite extended their fifth month in the green, the longest winning streak since 2021. The S&P 500 rose 3.1% for the month and the Nasdaq climbed 4.1%. For the year, the S&P 500 is now up close to 20% and is on pace for its biggest performance through the first seven months of the year since 1997.

Oil prices also recorded their biggest monthly gain since April 2022, which unfortunately will likely lead to higher prices at the pump. Brent Crude was up more than 14%, which helped the S&P 500’s energy sector, which was the biggest sector gainer in July.

2nd Quarter GDP Surprise:

Adding to the positive news for the year was 2nd quarter GDP, which came in better than expected and continued to be powered by consumer spending. GDP rose 2.4% for the quarter, following a 2.0% gain in the 1st quarter and marking the strongest quarterly pace since Q4 of 2022.

Interest Rates & Job Growth:

Last week, the Federal Reserve hiked interest rates by 0.25% to the highest level in more than 22 years. The quarter percentage point increase brings the fed funds rate to a target range of 5.25% - 5.5%. Chairman Powell said inflation has moderated since the middle of last year but hitting the Fed’s 2% target ‘has a long way to go’ and the central bank will remain data-driven at future meetings.

The jobs report, due this Friday, is expected to show ongoing strength in the labor market. Economists are predicting the economy will add another 200,000 jobs in July, which is slightly below the 209,000 in June. The data will certainly play a key component on expectations for the Federal Reserve’s next interest rate move in September.

Corporate Earnings:

Corporate earnings have been coming in better than feared which has helped drive stocks higher. On Thursday, both Amazon and Apple will be reporting their 2nd quarter, which could ‘set the tone’ for the rest of the market. According to FactSet, 80% of the S&P 500 companies so far have reported a positive earnings per share surprise. The blended earnings decline for the S&P 500 is -7.3% compared to last year. Analysts are expecting earnings growth to pick up in the 4th quarter, as they are projecting earnings growth of 12.6%.

Outlook:

The possibility of the Federal Reserve pulling off a soft landing is looking brighter as inflation metrics continue to cool. However, there are several headwinds on the horizon, including slower bank lending, higher oil prices, and student loan payments that are set to resume in October, which could put a dent in consumer spending. All eyes will continue to be on earnings and the jobs number this Friday for any additional clues on the strength of the U.S. economy. As always, thanks for joining me for this month’s market update.