Charts to Chew On: Stocks Jump (Again) in July.
Contextualizing monthly consumer sentiment and market momentum. Data as of July 31, 2023.
For those who are newer here, I publish monthly readouts on the state of the markets and the corresponding implications for the US consumer. Read on for more!
While the markets have felt like a bit of a roller coaster in recent months, July proved to be a continued climb higher with Q2 earnings and constructive economic data supporting a fifth straight month of stock market gains. The S&P climbed 3% over the course of the month, bringing the index up 20% year-to-date and just off of all-time highs. The NASDAQ showed similar strength, rising 4% and underscoring investors’ continued excitement surrounding the promise of all things AI.
July data painted a picture of a healthy and optimistic consumer as the Conference Board's consumer confidence index jumped to 117, marking the second month of robust expansion that brought the widely cited measure to its highest level in two years. The soaring sentiment seemingly confirmed the combination of slowing inflation and accelerating economic growth, with inflation slowing this month to +3% from its unwieldy +9% growth rate just last summer and annualized GDP growth accelerating to +2.4% in Q2 off of Q1’s healthy +2% base. With a healthy moderation in consumer spending growth and an acceleration in business investment, the fear of price squeezes and regional bank uncertainty seem to be drifting into distant memory.
The Federal Reserve too seemed to find solace in recent statistics as they spoke to open mindedness surrounding the pace of future rate hikes during their July meeting. While the Fed raised interest rates by another 25 basis points in July, the move, which was widely expected, failed to shake the market in a meaningful way. Though the hike indeed took borrowing costs to their highest level in 22 years, many market participants are now pricing in a peak, with the possibility of near to medium term rate cuts no longer out of the question.
Turning to earnings, with over 50% of the market having reported Q2 earnings thus far, companies have surprised to the upside and spoken to measured yet healthy consumer spending across demographics and consumption categories. While the rate of companies surpassing estimates and the magnitude of their beats, admittedly, fall below the average of recent quarters, the outlook remains optimistic across most sectors. From Mastercard and Visa credit card data to snack spending on McDonalds and Hershey’s, it appears that the market is finally finding a more normalized post COVID footing – no longer flying off the tracks nor grinding to an unwelcome halt.
So, as you chart your own way around this amusement park of a market this August, I welcome you to enjoy the following selection of data points to help with framing a mental model surrounding what sort of action we might collectively be in store for next.
Note: Data reflective of July 31, 2023. This does not constitute investment advice.
As a big believer in kaizen, I’m always open to feedback. Whether it’s names to include or formats to explore, please help me help you! Subscribe to my Substack or find me on Twitter at @itsmeeraclark.