Statistic of the Week:
It isn’t just state-run pension plans that are underfunded. Of the 200 largest corporate defined benefit plans in the S&P 500, 186 are underfunded. That leaves a gap of about $382 billion in future liabilities. Intel has the largest funding gap by percentage, short 53.4%, while GE has the largest gap in terms of dollars, short $31 billion.
The Chinese economy grew at a rate of 6.9% in the second quarter – matching the growth of the first quarter. The government has set an internal target of 6.5%. At the same time, steel production in China hit an all time record level in June, hinting that the government is taking measures beyond what it is stating to push growth.
Market Moving Events:
Monday: PMI Composite, Existing Home Sales Tuesday: Consumer Confidence Wednesday: New Home Sales Thursday: Jobless Claims, Durable Goods Orders, International Trade Friday: GDP, Employment Cost Index, Consumer Sentiment
The S&P 500 was higher last week along with the NASDAQ, while the DJIA fell slightly. The S&P ticked up 0.56% while the DJIA retreated -0.22%.1 The technology sector, which is best represented by the NASDAQ, had a terrible month of June, however it has been rallying nicely in July.2 Last week the NASDAQ set a record high, and has logged a return of about 5% since July 6th.3 Fixed income yields, which had moved notably higher after the last round of testimony by Fed Chair Janet Yellen, have again worked their way lower. The 10-year Treasury finished the week with a yield of 2.24%.4 We have been seeing a synchronized global expansion so far in 2017. Chinese growth (see the Global Perspective) continues to be a leader. On Friday, investors will receive the first look at GDP growth in the US for the second quarter. Coupled with several key earnings events, the markets will be watching for anomalies or any signals that things may not be as robust as expected. As the year began with the US economy showing positive trends, expectations have been for earnings to continue to show strength throughout the calendar year. Historically, as we enter the third quarter, analysts begin to revise down earnings estimates by about 4%.5 (Showing that analyst optimism generally fades as the year progresses). So far this year, the revisions have only been to the tune of 1%.6 If earnings continue to show strength, and GDP is in line, the markets may continue to look past gridlock in Washington. - Dan McElwee, CFP®
Chart of the Week: