It was a quiet, yet profitable week for the major averages this last unofficial week of summer. However, we think the peace will be rudely interrupted as the midterm elections approach. Expect added volatility and along with it, opportunity.
- The dividend yield on the State Street SPDR S&P 500 Trust (SPY) fell below one percent at 0.98% for the first time in twenty-five years. To us, this is an indication that secular growers (Technology, consumer discretionary and Communication Services) dominate the once-broad index as these companies tend to plow earnings and free cash flow back into operations and stock buybacks rather than increasing dividends. We recommend investors be wary of using this index as a barometer of portfolio returns and a measure of diversification.
- The end of an Era at Apple (AAPL) as current Chief Executive Office (CEO) Tim Cook stepped down after 15 years at the helm, turning the reins over to John Ternus, formerly Senior Vice-President of Hardware Engineering. Under Cook, Apple seemed to concentrate more on building its recurring revenue and less on product development, so this change is probably coming at an opportune time for Apple. The market capitalization of the company grew from $347 billion in 2011 to approximately $4.6 trillion today, an average gain of $680 million every day. Valuations are justifiably rich. We would use any meaningful pullback to accumulate shares.
- Housing remains on its heels as according to Apollo Global Management’s Chief Economist Torsten Slok, “nobody is moving. The structural decline in the share of the US population changing address continues, and the share of households planning to move over the next 12 months has fallen to a record low of approximately 7%.” Once capex surrounding Artificial Intelligence (AI) slows, growth in the housing market will be critical to a vibrant economy.
- The White House Announced that Venezuela has granted NABEP 100-year concessions on 17 oil fields. According to CNBC, “Venezuelan interim authorities have granted U.S.-backed North American Blue Energy Partners, or NABEP, 100-year concessions for 17 oil fields, with proven reserves of about 65 billion barrels,” CNBC also noted that “the company has granted the U.S. Department of War’s Office of Strategic Capital an equity stake of 35% in its corporate parent, according to the White House representing up to ‘hundreds of billions in value and dividends for the United States.’”
Economic Data That Drove Market Sentiment This Past Week…
- The Institute for Supply Management’s Services Purchasing Managers Index rose to 55.4% during August from 54.1% in July, the twenty-sixth consecutive month of expansion. Of note were New Orders (60.9% v 57.2%), Employment (47.8% v 47.4%), Backlog of Orders (55.6% v 50.9%) and Business Activity (61.7% v. 59.1%). The Prices Paid Component rose to 72.6% during August from 70.3% in July. According to Steve Miller, Chair of the Institute for Supply Management, “tariffs and the middle east conflict returned as the most cited issues impacting respondents’ supply chains. Positive summer seasonality was also a common theme.” (Source, Institute for Supply Management)
- Non-Farm Payrolls (approximately 80% of the U.S. workforce) rose by 162,000 during August, far surpassing the consensus estimate of 52,000. Payrolls for July and June were revised to 21,000 and 31,000 from -23,000 and 20,000 for a net gain of 55,000. This brings the net three-month average to 71,000 and the six-month average to 106,000. Economists continue to consider the impact of a lack of immigration, advances in technology as well as the current economic environment. Private Sector companies added 127,000 jobs while the Public Sector tacked on 35,000. Employment by the Federal Government fell 5,000 during August and by 339,000 since peaking in October 2024. Payroll data was influenced by construction (22,000), manufacturing (16,000), leisure and hospitality (62,000) and financial activities (-11,000). The Unemployment Rate was unchanged at 4.1%, its lowest level since June 2025. The Unemployment Rate had gotten as low as 3.4% in April 2023. The Labor Force Participation Rate rose to 61.6% during August from 61.4% in July. Ex the COVID era, the Labor Force Participation Rate is at its lowest level since June 1976. We would take this number with a grain of salt, given the number of “independent contractors” flying under the radar. Average Hourly Earnings rose 0.27% or $0.10 to $37.75 during August from $37.65 one month prior and by $1.13 or 3.09% from $36.62 y/y. Average Weekly Earnings rose 0.56% or $7.20 to $1,298.60 during August from $1,291.40 during July. Average Weekly Earnings over the past year have risen by $46.20 or 3.69% from $1,252.40. The Median Duration of Unemployment jumped to 11.4 weeks during August from 10.5 weeks in July, above 9.8 weeks (SAAR) one year ago. The number of Long-Term Unemployed (27 weeks or longer) rose 159,000 or 8.98% to 1,930,000 in August from 1,771,000 in July and below the level of 1,938,000 (SAAR) one year ago. Those unemployed less than 15 weeks totaled 57.0% of the unemployed while those unemployed 15 weeks and longer totaled 43.0% as compared to 57.8% and 42.2% one month ago. (Source, U.S. Department of Labor)
- The U.S. Trade Deficit widened to $88.6 billion during July from $71.2 billion in June. The value of Exports fell 2.08% to $310.7 billion from $317.3 billion while the value of Imports rose 2.78% to $399.3 billion during July from $388.5 one-month prior. (Source, Bureau of Economic Analysis)
- Nonfarm Productivity rose by an unrevised 1.4% during the second quarter (2.2% y/y) (SAAR), after rising 0.3% during the first. Hourly Compensation rose by 2.6% (3.7% y/y), down from an initial estimate of 2.7%, but up from 2.1% during Q1-2026. Adjusted for inflation, the Real Hourly Compensation fell a revised 3.3% (-0.1% y/y), worse than the initial estimate of -3.1% and after sliding 1.4% during the prior quarter. As a result, Unit Labor Costs (defined as output per hour of work and can be determined by dividing total labor costs by output) rose a revised 1.2% (1.4% y/y), down from an initial estimate of 1.3% and after having risen 1.8% during Q1. All figures are on a Seasonally Adjusted Annual Rate (SAAR). (Source, U.S. Bureau of Labor Statistics)
- The Institute for Supply Management’s composite index of manufacturing sector activity slid to 54.6 during August from 55.6 in July. Generally, a reading above 50% indicates that the manufacturing economy is expanding, below indicates one in contraction. Of note was the change in New Orders (53.7% v. 56.7%), Production (58.3% v. 58.5%), Supplier Deliveries (inverse, higher number indicates slower delivery times) (59.3% v. 58.9%), Inventories (50.6% v. 51.2%) and Employment (51.2% v. 52.8%). The Prices Paid Component held steady at 71.1 during August when compared to July. (Source, Institute for Supply Management)
- U.S. Construction Spending fell 0.5% in July (-3.8% y/y), after remaining unchanged during June. Private Construction Spending fell 0.5% in July (-5.5% y/y), after sliding 0.1% during June. Private Residential Construction Spending slid 3.2% during July (-6.5% y/y), after falling 0.1% in June. Private Nonresidential Construction Spending rose 0.4% during July, after edging 0.4% higher in June (-3.3% y/y). Lastly, spending on Public Projects fell 0.2% during July (1.7% y/y), after rising 0.1% during June. (Source, U.S. Census Bureau)
Economic Reports scheduled to be released this week, include the following – on Tuesday, July Consumer Credit; on Thursday, Wholesale Inflation as measured by the Producer Price Index (PPI) and the Initial Weekly Claims for Unemployment Benefits; and, on Friday, Retail Inflation as measured by the Consumer Price Index (CPI) along with the Preliminary September Consumer Sentiment from the University of Michigan.
Several potentially market moving companies are scheduled to report earnings, to include McCormick & Co. (MKC), Accenture (ACN), Nike (NKE), Lamb Weston (LW), Constellation Brands (STZ), Paychex (PAYX), Jefferies Financial (JEF), Adobe (ADBE), Macy’s (M), Kroger (KG) and Micron Technology (MU).
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Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
