July 2019 Monthly Outlook – A Tale of Two Cities

A Tale of Two Cities – the novel by Charles Dickens – about the life in two cities, London and Paris, during the 1800’s  – opens with “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness”.

The current state of affairs brought this quote to mind for me.  In this case our 2 cities are the economy and the financial markets.  The financial markets are behaving as if it was “the best of times” and the “age of foolishness” while the economy is looking more like we are moving towards worse times and a need for more wisdom.

The S&P 500 closed out June 2019 with the best first half of a year in over a decade, and less than 1% below a new all-time high.  All 11 broad industry sectors were positive YTD.  The best of times indeed.  The “Dumb Money” Confidence index just crossed into the red zone.  Notice what happens to the S&P500 (SPX) when this index reaches these levels.  Clearly some foolishness going on.


Conversely, the US economy closed out June with some negative trends emerging in economic data.  Leading Economic Indicators, published by the Economic Cycle Research Institute (ECRI) has rolled over and is at a level not seen since 2011.


The Conference Board’s consumer confidence index declined in June to its lowest point in nearly two years. The US economy remains the envy of the world but some cracks are starting to show. Certainly not the “worst of times” but clearly a trend that requires some “wisdom”

So what are we watching going forward:

  1. Second quarter corporate earnings season starts in earnest on 7/15/19.   To date 77% of companies issuing pre-announcements say their profit picture will be worse than Wall Street is expecting. That’s the second-worst quarter on record going back to 2006, according to FactSet. The biggest issue companies are reporting are uncertainty about US tariff policies. If corporate profits are poor the stock market will likely see a correction.7.2.2019_MONTHLY_OUTLOOK_CHART_3
  2. Tariff negotiations –  A temporary “truce” was announced in the trade war between the US and China.  I am skeptical a deal can be completed.  A similar “truce” was announced back in December 2018, only to have both the US and China increase tariffs in mid-May 2019.  Additionally, there are pending tariffs on European Union auto’s that need to resolved by November 2019. There is also a brewing trade battle with India.
  3. The Federal Reserve – at their June 2019 meeting they appeared to signal a willingness to lower interest rates to help support the slowing economy. Despite what the President says, monetary policy is not “tight” and negatively impacting the economy.  In fact, monetary policy is quite loose and I think a rate cut now is unwarranted.  I also don’t believe a rate cut will be sufficient to offset the negative effects of all the tariff battles going on.
  4. Congress – the US still needs to raise the debt ceiling and create a new federal budget by the end of September.  Given the disfunction in Washington this is sure to be an 11th hour, kick the can down the road issue.
  5. International issues – The United Kingdom faces an election of a new Prime Minister and finalizing their exit from the EU.  Rising tensions in the Middle East, specifically around Iran and the nuclear treaty.


In summary, our outlook going forward is one of caution but not defensive. I prefer to not try to chase gains at the expense of suffering losses if the stock market wakes up to what the economy is saying.  We continue to focus on well diversified portfolios with good risk controls.

Please call us if you have any questions.

Feel free to pass this note along to family, friends, and colleagues as you see fit.


P.S. Thank you for your referrals. They are making a big difference in my practice. Feel free to share my name with your friends on Facebook or LinkedIn.

I want to extend a special thanks to clients & colleagues who have recently referred us to family and friends:

Benny G.     Kevin W.   Richard L.


July Calendar of Events   (comments and additions for future months are always welcome)

    • July is National Picnic and National Parks month – why not go to a national park and have a picnic – a 2 for 1
    • Interesting tidbit – July Fourth — When the Continental Congress approved the Declaration of Independence on July 4, 1776, the population of the 13 colonies was 2.5 million, equal to the population of Houston today (source: Census Bureau, BTN Research).



July 1st             Bureau of Internal Revenue (the IRS) founded in 1862– betcha nobody celebrates this birthday

July 4th            Independence Day

July 11th          My daughter Ryan’s birthday

July 21st           National Ice Cream Day   – Breyers vanilla with Hershey’s chocolate syrup is my go-to

July 29th          National Lasagna Day

July 30th              International Friendship Day is a day designed to foster friendships and bridge the gaps between race, color, religion



  • Sources:  SentimenTrader, Advisor Perspectives, CNBC









Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.


Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.


Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.


Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

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