By Rick Schwerd |
Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for
our next update on July 24.
Trump Declares Ceasefire Over
Following Iranian attacks on three ships in the Strait of Hormuz over the weekend, President Trump declared the
ceasefire over. The U.S. resumed bombing military targets and revoked Iran's oil-selling license. Oil prices, which
had dropped to $68 per barrel at the start of the month, slightly above pre-war levels, jumped to $76 per barrel on
Wednesday. Prices dropped back to $73 per barrel at the time of writing this week's Investment Update. Prices remain
well below the highs reached in early April, when they peaked at $115 per barrel.
Flare-ups in the conflict were expected, especially given the fragmented nature of the Iranian leadership. The global
economy can handle prices in the current range. However, we will likely see continued volatility in energy markets
given the delicate nature of the existing status quo and the fact that international reserves are at very low
levels.
Solid June Labor Market Report
Last week's release of the June Labor Market Report showed a gain of 57,000 jobs, slightly below expectations. The
unemployment rate did drop to 4.2 percent, the lowest level since last June. The economy has averaged an increase of
just under 100,000 jobs this year. We continue to be in a low-hire, low-fire labor market. Average hourly earnings
increased a tenth of a percent to 3.5 percent. This represents a solid increase in wages, but not at a level that
would add to inflation concerns.
Markets Churn Near All-Time Highs
We are seeing a significant amount of volatility within markets even though they remain just below their all-time
highs reached in early June. The S&P 500 is 1.3 percent below its
June 2nd all-time high of 7,609. However, approximately 40 percent of the companies in the index are 20 percent or
more below their all-time highs, with two-thirds of the S&P technology sector down 20 percent or more.
As mentioned in our recent updates, given the amazing run we had from March through early June, a period of
consolidation and volatility was likely. Many of the companies that are 20 percent below their all-time highs remain
up 100 percent or more for the year.
The fact remains; good corporate earnings will likely continue to be a strong tailwind for markets as we enter the
second half of the year. Despite the S&P 500 being up nearly 20
percent over the last year, the Price to Earnings (P/E) ratio for the index is below where it was last year at this
time. According to research provider Earnings Scout, the P/E ratio for next year's expected earnings is currently
18.8 compared to 20.0 last year at this time.
Looking Ahead
Next week marks the unofficial start of the second-quarter earnings season when five major U.S. banks, including JP
Morgan, Bank of America and Goldman Sachs, report Tuesday morning. Expectations are high for the banks as they had a
surge in equity trading revenue due to the volatile markets. We'll also get several June economic reports, including
the Consumer Price Index (CPI), Producer Price Index (PPI) and retail sales. The inflation data is expected to show a
slight improvement as energy prices eased during the month.
As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out
to us at (518) 415‑4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a
Senior Investment Officer at Arrow Bank. He oversees individual and corporate retirement plans, personal trusts,
investment management accounts, foundations and not‑for‑profit relationships.