July was a weak month across the globe, with most major markets generating negative results. In developed economies, equity performance was dictated by market capitalization, with large caps returning -1 to -2%, mid caps -3%, and small caps -6%. The lone bright spot was emerging market equities, which returned 1.9% on an expansion in Chinese manufacturing orders. European investors sought safety in German bunds on the news of a Portugese bank defaulting on its debt obligations and further tensions in Ukraine and the Middle East. The 10yr U.S. Treasury was largely unchanged for the month, while high yield experienced losses as $5.4 billion was redeemed from non-investment grade ETFs and funds.
- GDP is expected to expand by 4.0% during Q2 as companies report strong sales and inventory restocking; additionally, GDP for Q1 was revised upward, from -2.9% to -2.1% (BEA)
- The S&P 500 is on track to set another record earnings quarter in Q2, as companies are reporting 10.1% YOY growth and profit margns at 10.1%; thus far, 78% of reported EPS has surpassed estimates by 6% (J.P. Morgan)
- The $5.4 billion that exited junk bond strategies in July was the largest outflow in 13 months; the move appears technical in nature, as retail sellers concerned about valuations have been filled by institutional buyers (Goldman Sachs)
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