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

Market Returns for July:

The stock market continued to trend higher in July, but it wasn’t driven by the big technology companies. The S&P 500 Index was up 1.22% despite the technology sector being negative for the month. The market saw a rotation in small-caps, with the S&P SmallCap 600 Index up 10.80%. Wow, what a rally! Small-cap stocks benefited from the expectations for potential rate cuts.

For the month of July, international developed markets outperformed the S&P 500 Index as the MSCI EAFE Index was up close to 3%. The emerging markets lagged the international developed markets as it was up only 0.55%.

GDP:

The first estimates for the second quarter GDP growth rate came in at a 2.8% annualized rate and exceeded expectations. The higher-than-expected growth rate was driven by consumer spending.

Federal Reserve/Inflation/Interest Rates:

The Federal Reserve met on July 31st and held its key interest rate unchanged at their current level of 5.25 – 5.50%. The Fed did say that a rate cut could come as soon as September, citing overall economic data, including employment and unemployment. This is a different tone from the last meeting, where inflation was the main focus for cutting rates, not the jobs market.

Jun'’s core Personal Consumption Expenditure (PCE) rose by 0.2% month-over-month and 2.60% year-over-year as inflation continued to moderate at a slow pace.

With the latest economic data and Fed meeting, the markets are now pricing in three sequential rate cuts at the remaining three meetings for the year.

Corporate Earnings:

Earnings season kicked off this month with a strong start. So far, S&P 500 companies are growing second quarter earnings by 9.1%, with about 70% of companies reporting. Meta was the latest Magnificent Seven stock to report, announcing earnings that topped expectations.