The Independent Market Observer

Monday Update: U.S. Solid, Greece and China Rock Markets

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Jul 6, 2015 2:55:29 PM

and tagged In the News

Leave a comment

Monday UpdateStarting today, I’m introducing a new format for my Monday posts, briefly highlighting key stories from the past week plus items to watch in the week ahead. Of course, I’ll continue to provide more detailed analyses of major topics throughout the week, as situations develop.

Please let me know what you think of this new format!

The Housing Market

Housing demand continues to be strong, with pending sales for May up significantly over the prior year. Although the increase was somewhat less than expected, the very strong prior monthly data was also revised upward. Prices continued to increase as well, but at a slower and more sustainable rate. Overall, the news for the housing sector was good, with very healthy demand and price action suggesting a sustainable growth path.

Let’s look at the actual numbers:

  • Pending home sales were up 8.3 percent year-over-year in May, with the prior month’s annual increase revised from 12.6 percent to 13.4 percent.  
  • Sales increased 0.9 percent on a monthly basis, and the prior month's data was revised up from a 2.7-percent gain to a 3.4-percent gain.  
  • Housing prices increased across the board. The S&P/Case-Shiller composite index showed a year-on-year increase of 4.91 percent, and the prior month’s gain was revised down slightly, to 4.96 percent from 5.04 percent. This level of appreciation, although in excess of general price inflation, is considered to be sustainable and indicates continued health in the housing market.

Labor and Consumer News

Consumer confidence surged higher in June, despite increases in gas prices, largely thanks to continued improvement in the job market. Job growth continued at strong levels, and although wage growth continued to disappoint, unemployment remained on the decline.

Delving into the numbers:

  • Jobs grew by 223,000 in June, slightly below the expected 233,000, but still at a healthy level. The number of jobs created in the past 12 months exceeds the number created at any point in the 2000s.
  • Unemployment declined to 5.3 percent from 5.5 percent, and the underemployment rate dropped even further, to 10.5 percent from 10.8 percent. Both are at their lowest levels since mid-2008.
  • Monthly wages were flat, however, and the annual increase dropped from 2.3 percent to 2 percent. Wage growth remains the major area of worry, and this month’s report did nothing to assuage that concern. Although many expect a declining unemployment rate to boost wage growth, the data shows that is not happening yet.


The big story over the weekend, of course, was the Greek referendum. Greece voted not to accept further austerity, but what happens next is still unclear. The underlying problems—that Greece cannot pay its debts nor afford its current spending—remain. Germany and other creditor countries are sending mixed signals on what kind of offer (if any) they will make to the Greeks. That offer will determine how bad the Greek economy, and potentially the economy of Europe as a whole, will get hurt.

There’s little else to say at this point, but markets are selling off in reaction to the uncertainty. As with last week, the sell-off looks to be measured and rational—nothing to worry too much about at this point.


With the world's eyes on Greece, China’s government acted strongly this weekend to support its stock market. This could potentially be a more serious issue than the Greek situation, but it has attracted much less attention. After a reduction in rates and reserve requirements (a combination last seen in 2008) didn’t support the markets, the Chinese government directed the central bank to act to make loans available.

This is a story in the early stages, but it's one to watch closely. We’ll look at it in detail tomorrow.

The Week Ahead

The major event here in the U.S. will be the release of the minutes from the Federal Reserve’s June meeting. The markets will be looking for signs of what the Fed needs to start raising rates. Given the improving data that has been released since the meeting, though, and Janet Yellen’s pending congressional testimony, the minutes should have relatively little impact.

We'll continue to watch what happens in Greece and Europe, as well as in China. As I've said before, these events will certainly impact us here in the U.S., but fortunately, we're well positioned to ride out any turbulence. It should be an interesting week.

Subscribe via Email

Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®