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July 13, 2018

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

Once again, the economic data took a backseat to trade policy concerns. Trade tensions escalated as China responded to U.S. tariffs (a 25% tariff on $34 billion in Chinese goods imposed on July 6), with increased tariffs on $34 billion in U.S. exports. The U.S. indicated that it would retaliate against the Chinese retaliation with a 10% tariff on an additional $400 billion in Chinese goods. President Trump has also threatened to impose tariffs on $350 billion in imported motor vehicles and parts, which would bring the total to around $850 billion of U.S. imports (4.6% of GDP).

The Federal Reserve's Monetary Policy Report repeated two key themes. The first is that (even after the June 13 rate hike) officials still view policy as "accommodative" - that is, not "neutral." The second is that further gradual increases in short-term interest rates are expected. Policymakers generally see some remaining slack in the labor market, which allows the Fed to move gradually. The report mentioned trade policy uncertainty as a factor holding down long-term Treasury yields and restraining equity prices.

Next week, there may be some market reaction if we get a surprise in the retail sales report, but the focus is going to be on Fed Chair Powell's monetary policy testimony to the Senate Banking Committee (Tuesday). Powell's written testimony will be released an hour and a half before the hearing begins, but there's always a chance that something will come up in the Q&A. Powell will repeat his testimony to the House Financial Services Committee on Wednesday.


  Last Last Week YTD return %
DJIA 24924.89 7823.92 0.83%
NASDAQ 7823.92 7586.43 13.33%
S&P 500 2798.29 2736.61 4.66%
MSCI EAFE 1966.12 1954.39 -4.13%
Russell 2000 1690.28 1679.48 10.08%

Consumer Money Rates

  Last 1 year ago
Prime Rate 5.00 4.25
Fed Funds 1.90 1.16
30-year mortgage 4.65 4.03


  Last 1 year ago
Dollars per British Pound 1.321 1.297
Dollars per Euro 1.167 1.163
Japanese Yen per Dollar 112.55 111.91
Canadian Dollars per Dollar 1.315 1.259
Mexican Peso per Dollar 18.980 17.486


  Last 1 year ago
Crude Oil 70.33 46.92
Gold 1246.60 1252.10

Bond Rates

  Last 1 month ago
2-year treasury 2.58 2.55
10-year treasury 2.84 2.92
10-year municipal (TEY) 3.80 3.85

Treasury Yield Curve – 07/13/2018


As of close of business 07/12/2018

S&P Sector Performance (YTD) – 07/13/2018


As of close of business 07/12/2018

Economic Calendar

July 16  —  Retail Sales (June)
July 17  —  Industrial Production (June)
 —  Powell Monetary Policy Testimony (Senate Banking Committee)
July 18  —  Building Permits, Housing Starts (June)
 —  Powell Monetary Policy Testimony (House Financial Services Committee)
 —  Fed Beige Book
July 19  —  Jobless Claims (week ending July 14)
 —  Leading Economic Indicators (June)
July 26  —  Durable Goods Orders (June)
July 27  —  Real GDP (advance 2Q18 + comprehensive benchmark revisions)
August 1  —  Fed Policy Decision (no press conference)
August 3  —  Employment Report
September 26  —  Fed Policy Decision (Powell press conference)


All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

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