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The Dow Jones Industrial Average broke 22,000 on Thursday, marking the 32nd record close this year. This was the event of the week, even if credit unions are focusing more on bonds than stocks. Apple was the catalyst that pushed the index to its next milestone, accounting for 49 of the 52 points the index added on Wednesday. The company reported strong sales and overwhelming demand for its iPhone and iPad products. The stock market has been increasing almost non-stop this year, fueled by two quarters of strong earnings from companies from Boeing Co. to McDonald’s Corp. The weaker dollar, improving economic strength in the U.S. and overseas and enough optimism to spur business investment have contributed to a very positive stock market.

Other Key Indicators this Week:
 

Jobs – July was a very good month for jobs. Employers added 209,000 jobs during July, bringing the three-month average to just under 200,000. Service-providing industries gained the most workers, with the usual categories topping the list: health care, leisure and hospitality, and professional/business services. Mining posted a respectable increase of 16,000 jobs. The unemployment rate dipped to 4.3 percent, matching the 16-year low rate from May. The decline was the result of an increase in the labor force, accompanied by almost no loss of jobs. Wages rose 0.3 percent for the month, but not enough to push the year-over-year increase above 2.5 percent. While we are not seeing any meaningful jump in wages, the good news is that none of the major industries posted a decline in wages.

Auto Sales – July was another disappointing month for auto dealers. New auto sales rose less than one percent and marked the seventh month of a declining trend after reaching a peak of 18 million units in December 2016. Sales were down 6.5 percent from July 2016. Auto dealers are scaling back on fleet and lease sales in an effort to keep profits up and prevent an overhang of inventory when the leases expire. Lease sales have fallen 7.8 percent this year and accounted for 29 percent of sales in July, compared to a record 32 percent in 2016. Dealers continue to increase incentives to move inventory as fast as possible. It took an average of 76 days to "turn," or sell, a new vehicle last month. This was the highest days-to-turn since the recession in July 2009.

Spending and Incomes – Consumers were cautious about spending in June, marking the third consecutive month of slower sales. Personal consumption rose 0.1 percent in June, a large decline in momentum from a rise of 0.5 percent in March. The income gauge was unchanged due to a large one-time drop in dividend payments, which overshadowed a 0.4 percent increase in wages and salaries. The personal savings rate increased to 3.8 percent. The gauge used by the Federal Reserve to track inflation inched up a tenth of a percent to 1.5 percent, but is far below the two percent target.

Between the Numbers:

The summer liquidity shift is in full swing this year. Liquidity levels tend to run low for credit unions as the year moves along, but this year appears to be worse. Many credit unions of all sizes are enjoying steady loan growth through organic or indirect programs. The timing is good, because investment yields have seemingly taken a vacation. There has been little movement in the bond market as supply continues to dwindle. For credit unions with excess funds to invest, higher rates on cash accounts have become a welcome benefit after many years of earning close to zero percent.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.