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August 2019
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National Non-Operating Observations
Labor markets remained robust in July, with non-farm payrolls increasing by 164,000. This number was in line with expectations and a slight decrease of 29,000 from June revised levels. July’s unemployment rate stayed near its historical lows at 3.7 percent.
The U.S. Bureau of Economic Analysis released its preliminary second quarter Gross Domestic Product (Q2 GDP) growth estimate of 2.1 percent, which is a decline from the Q1 GDP growth estimate of 3.1 percent, but positive compared to market expectations of 1.8 percent. This is largely due to consumer spending maintaining a healthy growth rate of 4.3 percent.
Concerns about slowing expansion and further interest rate cuts continue to fuel volatility in the economic landscape. This pattern of volatility and suppressed growth could continue to impact both the domestic and foreign markets, unless the U.S. is able to reach a trade agreement with China, and the Fed is able to reassure investors that the interest rate adjustment reflected a temporary measure not indicative of a wider fiscal approach.
†2Q 2019 U.S. Bureau of Economic Analysis “Preliminary” Estimate
*60/40 Asset Allocation assumes 30% S&P 500, 20% MSCI World, 10% MSCI EM, 40% Barclays Agg.
Notes: (1) reflective of most up-to-date data available; excludes food and energy sectors

July 2019
Month Over Month Change
Year Over Year Change

GDP Growth
Unemployment Rate
(20 bps)
Personal Consumption Expenditures, Y-o-Y(1)
+20 bps
(30 bps)
(17 bps)
+14 bps
30yr MMD
(7 bps)
(77 bps)
30yr Treasury
0 bps
(56 bps)
60/40 Asset Allocation*
Non-Operating Assets
A blended 60/40 Asset Allocation increased 0.40 percent in July, compared to an increase of 4.43 percent in June. The blended 60/40 Asset Allocation is up 12.3 percent since the start of the year, and at its highest level in more than a decade. Equities remained positive in July, with a 1.31 percent gain after the S&P 500 added 6.89 percent in June. The index is now up 18.89 percent since the start of 2019. The Dow Jones and Nasdaq also performed positively, with all three U.S. indices maintaining their near record-high levels. Internationally, the MSCI World Index increased 0.42 percent and the MSCI Emerging Markets Index decreased 1.69 percent in July. The Barclays Aggregate Index also rose in July, up 0.22 percent for the month.
Long Term
Last Twelve Months
Long Term
Last Twelve Months
Non-Operating Liabilities
Positive technical trends persist in the tax-exempt market. Municipal funds continue to see strong inflows amid a dearth of tax-exempt bond supply. Positive sentiment from investors caused $9.51 billion to enter muni funds in July, with $56.2 billion entering the market since the start of 2019. On a year-to-date basis, this figure shows a significant increase from $13.8 billion over the same period in 2018.
30-year MMD and 30-year Treasury rates held steady in July, after dramatic decreases of 78 bps and 49 bps, respectively, from the start of the year through July. The 30-year MMD ended the month at 2.24 percent, down 7 bps month over month. The 30-year Treasury yields ended July at just 1 bps lower than the beginning of the month, at 2.52 percent. In the short-term benchmark markets, 1M LIBOR finished June at 2.22 percent, down 28 bps since the beginning of 2019. After plummeting 88 bps in May, the tax-exempt short-term benchmark SIFMA ended the month at 1.40 percent, down 50 bps month-over-month and down 31 bps since the beginning of 2019.
Long Term
Last Twelve Months
Long Term
Last Twelve Months
Note: Taxable and tax-exempt debt capital markets, as approximated here by the “30-yr U.S. Treasury” and “30-year MMD Index,” are dependent upon macroeconomic conditions, including inflation expectations, GDP growth, and investment opportunities elsewhere in the market. A key measure to track is bond fund flows, particularly in the more supply- and demand-sensitive tax-exempt market. Fund flows are monies moving into bond funds from new investments, and principal and interest payments on existing and maturing holdings. Strong fund flows generally signal that investors have more cash to put to work, which is a boon to demand. Fund inflows generally are moderate and consistent over time, while fund outflows typically are large and sudden, as external events affect investor sentiment. This results in quick position liquidation, which can drive yields up considerably in a short amount of time.
National Observations
National Observations
©2019 Kaufman, Hall & Associates, LLC
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