As the Fourth of July approaches, the U.S. markets continued their move higher, with the S&P 500 gaining approximately 1.9% for the month.  Although there were a lot of encouraging economic reports throughout the month, the market did have to sidestep a few notable “negatives” in order to continue its advance.

First, the good news:

  1. May non-farm payrolls were up 217,000 and the unemployment rate dropped to 6.3%
  2. Consumer Confidence rose to 85.2
  3. New home sales were up 18.6%, coupled with existing home sales up 4.9% — a very strong month for housing.
  4. PMI Manufacturing was up 57.5 vs. 56.4 and industrial production was up .6%

On the negative side, the revision to first-quarter 2014 GDP was shockingly low at -2.9%, revised down from -1% reported in May. This represented the biggest decline since 2009. In addition, the IMF cut its forecast for 2014 U.S. growth, providing a “double whammy” of sorts for those who pay close attention to past GDP and GDP expectations.

Fortunately, it appears that the market was willing to accept that bad winter weather was likely to blame for the 1st Quarter GDP decline. Furthermore, the general consensus about both GDP and the IMF report was that the Fed will be forced to continue its very slow “tapering” of stimulus in order to ensure that the economy is strong enough to handle it.

If you’ve read our prior monthly updates, you know that we like to focus on the price of gas because of the widespread economic this has on both businesses and consumers. Unfortunately, the price of gas rose to $3.70/gallon after appearing to have stabilized the few months prior. At $3.70/gallon, gas now costs over 20 cents per gallon more than it did a year ago, according to the U.S. Energy Information Administration. Here is an interesting article of local interest from the Washington Post for readers in the VA-DC-MD areas.

We hope that you have a safe and happy Fourth of July, and we appreciate your taking the time to read this month’s update.

Carl Beck

July 1, 2014