Capital Market Indicators for July 9

U.S. Economy—Recent median Fed forecast for 2018—Real GDP growth: 2.8%, Unemployment: 3.6%, Inflation: 2.1%.

• We expect 2018 real U.S. GDP to grow at about a 2.5%–3.0% rate. In our opinion, the probability of a U.S. recession is low.
• Based on the Federal Reserve Bank of Philadelphia’s U.S. Coincident Index, our gauge of U.S. economic activity (above left) registers a May 2018 reading in the 61^st percentile.
• Recent developments:
  • The Conference Board Consumer Confidence Index declined in June to 126.4 from May’s 128.8. While expectations remain high, the modest drop suggests that consumers do not foresee the economy gaining much momentum in the months ahead.

Capital Markets—Growth dominates value. In 1H 2018, the R3000G Index gained 7.4% while the R3000V lost 1.2%.

• Valuation:
  • Based on the S&P 500 trailing 12-month price-to-earnings ratio, our gauge of U.S. equity valuation (above center) registers a current reading in the 16^th percentile.
• Sentiment:
  • Based on the National Association of Active Investment Manager’s Exposure Index, a contrarian indicator, our gauge of U.S. stock market sentiment (above right) registers a July 4, 2018 reading in the 34^th percentile.