The final trading week in July saw little movement in equity markets, with the SPX and other broad indexes nearly unchanged for the week. Volume dropped off from the prior week in generally lackluster summer trading. Gains for the month came in around 7%, with the SPX settling below the 200 day MA but above the 50 day. Basically, June and July came out to be a wash.
In the bond market, with more poor economic data and a Fed governor voicing deflation concerns, the 10 year Treasury fell back below 3% yield and reached a new low for the year on a closing basis. The longer maturity yields also fell, but not as much, and did not reach new lows.Investment grade corporates and munis continued to rally and remain overbought, while TIPs were also bid up after consolidating for the past few weeks. It’s pretty clear investors remain attracted to bonds and the deflation theme is gaining traction.
The US Dollar continued its summer slide and has now retraced more than 61.8% of its spring rally, suggesting we may return to the 80 level. With the dollar falling, commodities were up on the other side, as the grains and ag in general had another good week. In the energy markets, oil was little changed but the more volatile natural gas had another solid upward move, gaining nearly 8% for the week. Gold remains in a consolidation.
Looking ahead, the markets aren’t giving us much in the way of clear signals, and the action is generally directionless. We’re still looking for the next major trend to reveal itself, and in the meantime, there is little to do but watch and wait.
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