- A looming U.S. default and stalemated policymakers gripped equity markets in July, driving them lower for the third consecutive month.
- Bonds were once again the beneficiaries of uncertainty and fear, as a flight to quality pushed Treasury yields lower and bond prices higher.
- The pace of economic growth slowed more than expected in the second quarter and revisions to prior periods were also surprisingly negative.
- The July jobs report was better than anticipated, but the pace of job growth continued to disappoint.
- Inflationary pressures are showing signs of ebbing, providing some relief to consumers.
- Against the backdrop of a slowing economy, contained inflation, and languishing jobs market, the potential for the Fed to provide additional stimulus is increasing.
The Importance of Being Earnest …
“Anyone who lives within their means suffers from a lack of imagination.” – Oscar Wilde, Playwright and Poet
Perhaps the Irish playwright was trying to live up to his surname, but we cannot endorse Wilde’s quip. At risk of being accused of stating the obvious, living within one’s means is just the starting point for sound financial advice. As such, we can’t help but appreciate the irony of his statement within the context of today. By Wilde’s measure, policymakers in many developed nations have demonstrated imagination commensurate with creative genius. There’s been anything but a lack of imagination, as countries including Greece, Spain, Portugal, and, arguably even the United States, have extended their fiscal wherewithal well beyond their sustainable means. In recent months, headlines surrounding debt, deficits, and defaults have been unavoidable. These issues are unlikely to be resolved for some time, but a temporary reprieve from these defaults was again delivered in July for both the United States and affected Eurozone nations.