U.S. investors who remained calm in the face of the Greek debt crisis saga and a sell-off in the Chinese stock market were rewarded with the biggest monthly stock market gain since February.
The S&P 500 Index advanced 2% in July helped by good corporate earnings from companies like Google (GOOG), Amazon (AMZN), Chipotle (CMG), and Netflix (NFLX).
Thankfully the situation in Greece appears to be coming to a positive compromise that does not involve an exit from the euro.
U.S. markets also managed to brave a stumble in China’s Shanghai Composite Index.
Earnings
So now that the global market turmoil has calmed down, the focus is back on the domestic picture, namely corporate earnings results and the timing of a Fed interest rate increase.
About two-thirds of companies in the S&P 500 have now reported, with 74% beating earnings estimates and 50% topping sales estimates, according to my research.
While the earnings picture is not all rosy, Apple (AAPL) uncharacteristically missed estimates on slowing iPhone sales, much of the earnings weakness is the result of a strong dollar overseas and weak energy prices.
Commodities Rout
Slowing growth in China, the world’s biggest consumer of raw materials, is bad news for commodity prices like energy and mining.
The Bloomberg Commodity Index declined a whopping 11% in July, the biggest decline since September 2011, trading to a 13-year low.
Upside
The good news is that the uncertainty created by weakness in the global economy and by continued disappointing wage growth here in the U.S. has increased the likelihood that a Fed rate increase is not imminent.
All eyes will be on future jobs reports and other economic data for clues as to whether the Fed will feel comfortable raising rates in September.
Photo Credit: Derek Key via Flickr Creative Commons
The investments discussed are held in client accounts as of August 5, 2015. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.
