We started the second half of the year with a little market volatility as investors digested a number of significant headlines in July.  The S&P 500 rallied strongly in the first half of the month before pulling back, but still closed about 1% higher for the month, and is now up almost 16% for the year. (YCharts)

We believe that the volatility we’re seeing in markets is a normal, and healthy, characteristic of a bull market and aren’t making any major changes to portfolios at this time given our base case that the economy avoids a meaningful recession, corporate earnings remain resilient, and stocks move moderately higher.  Of course, our active approach means that as economic data evolves, we’ll be ready to make adjustments to our portfolio positioning.

This month we’re going to highlight three data points that reinforce our outlook that an imminent recession is unlikely.

• Economic Growth: 2^nd quarter US GDP growth was better than expected coming in at 2.8% on the strength of consumer spending.  We believe that it will be important to keep a close eye on the consumer. (YCharts)

• Earnings: We’re still early in the Q2 earnings season, but the data so far has been solid with 78% of companies in the S&P 500 beating earnings expectations (with 41% of companies reporting).  We continue to feel that it’s important to see steady earnings growth particularly given current valuations. (FactSet)

• Inflation: A number of data points over the past month continued to show an improving trend in inflation. This reinforces the expectation that the Fed will likely cut rates for the first time in September.

We will continue to watch for cracks in each of these areas as we move forward, but as we indicated above, we currently have portfolios positioned for growth; however, we’ll be ready to make adjustments as needed. 

As always, please don’t hesitate to reach out if you have any questions and feel free to pass this email along to any friends, family, or colleagues that you feel would benefit.

Sincerely,

Your Team at TLWM

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