• 1-866-581-5724
  • 211 B NW Executive Way, Lee's Summit, MO 64063
  • info@lsaportfolios.com

Weekly Economic Update - 7-10-2023

7/10/2023 brad

Blog Image


Economic Update 7-10-2023 

  • In a holiday-shortened week, economic releases included the mixed results of ISM manufacturing falling further into contraction, while ISM services rose further into expansion. The employment situation report showed positive jobs growth, but at a slower rate than expected, to cap a week of mixed labor data generally. 
  • Equities fell globally last week, with expectations for more hawkish central bank policy and associated higher interest rates for longer, following not-terrible economic data. Bonds fell back along with higher assumed rates. Commodities were up slightly, led by production cuts in crude oil that boosted prices. 

U.S. stocks fell back generally last week, as decent economic news continued to perpetuate an assumed hawkish Fed policy lasting longer than expected, with further rate hikes. Stocks declined sharply on Thurs. specifically as strong labor market data (ADP and claims) highlighted these expectations. This was particularly true in light of somewhat hawkish Fed minutes from June, where further hikes were debated to a greater degree than was previously assumed. Nearly every sector was down for the week, led by health care, materials, and technology. Health care appeared to be negatively affected by disappointing trial results for a new lung cancer drug from AstraZeneca. Utilities and communications suffered least, with minimal changes for the week. Real estate gained a fraction of a percent, interestingly, despite a rise in interest rates.  

Earnings season for Q2 begins next week, which may provide more clarity on the underlying health of firms, with FactSet predicting a -7% drop in the quarter, and a slight deterioration in revenue growth. Within the index, expected double-digit 12-month earnings gains in consumer discretionary and communications are assumed to be offset by dramatic downward reversals in energy, materials, and health care. For what it’s worth, the earnings decline is expected to be short-lived, with Q3 earnings growth flattish, full-year 2023 growth just under a percent, and full-year 2024 growth up 12%. Of course, these are all preliminary figures, but tend to price in a peak slowdown mid-year, with a recovery towards year-end. The near-term focus remains on profit margins (which have deteriorated with inflation but remain historically high), stresses from credit contraction, consumer spending rates, and potential developments and usage of AI as a productivity input to growth models. 

Foreign stocks fell to a greater degree than domestic, led by declines in Europe and the U.K., due to continued concern over the hawkishness of future central bank policy, weak industrial production results in Germany, and house price/mortgage pressures in England. On the other hand, Japan and emerging markets experienced minimal declines. EM was helped by a small gain in China, with manufacturing and services numbers declining but remaining in expansion. 

Bonds fell back last week as interest rates moved higher—all in keeping with the more hawkish Fed policy sentiment. Senior bank loans fared best, with a minimal decline, due to their floating rate nature. Corporates in general fared slightly worse, as credit spreads widened a bit. Foreign bonds also fell back, despite the helpful influence of a weaker dollar. 

Commodities generally saw gains for the week, led by energy. Crude oil rose nearly 5% last week to $74/barrel, due to signals of some tightening in supply, and announced production cuts by Saudi Arabia and Russia. This offset a -8% drop in natural gas prices, as U.S. temperatures moderated a bit from extreme heat. 

Period ending 7/7/2023 

1 Week % 

YTD % 




S&P 500  






Russell 2000 









Bloomberg U.S. Aggregate 




U.S. Treasury Yields 

3 Mo. 

2 Yr. 

5 Yr. 

10 Yr. 

30 Yr. 



















Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.                                                                                    

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.