The Latest From the Beige Book

The U.S. economy continued growing at a “modest” rate in recent weeks, with consumers continuing to spend and a “generally positive” outlook overall despite disruptions caused by U.S. trade policy. That's according to the latest Beige Book, published by the Federal Reserve yesterday.

Employment continued to expand and “labor markets remained tight, with contacts across the country experiencing difficulties filling open positions,” the Fed reported. “The outlook generally was positive for the coming months, with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty.”

In our area, ports along the East Coast saw robust activity, with one reporting record-breaking imports led by furniture. On the other hand, prices for Broadway theater admissions were down roughly 10 percent from a year earlier.

Fund Fees Are Falling

Investing in equity and hybrid mutual funds through 401(k) plans became cheaper in 2018 according to a new report from the Investment Company Institute, a trade group for the fund industry. This is part of a longer-term trend; the fees investors have been paying have dropped significantly since 2000.

At the end of last year, mutual funds represented 63 percent of the $5.2 trillion in 401(k) plan assets. Plan participants incurred an average expense ratio of 0.41 percent for equity mutual funds in 2018, which is down from 0.45 percent in 2017 and  down from 0.77 percent in 2000 — a 47 percent decline.

The average expense ratio that 401(k) plan participants incurred for investing in hybrid mutual funds fell to 0.49 percent in 2018, down from 0.51 percent in 2017 and 0.72 percent in 2000. Bond mutual fund investors, on the other hand, saw their average expense ratio hold steady at 0.34 percent between 2017 and 2018, although they're down from 0.6 percent in 2000.

The Chinese Slowdown

While the American economy continues to be strong, China's economic growth has slumped to its lowest level in nearly three decades. The country's GDP grew at 6.2 percent in the quarter ended June, according to government figures released on Monday. That's the slowest quarterly growth since 1992 and down from 6.4 percent in the previous quarter.

China's exports fell 1.3 percent year-on-year for the first half in dollar terms, while imports dropped 7.3 percent. The country recorded a sharper decline in exports to the United States, which decreased 8.1 percent for the first six months of 2019. Imports from the United States plunged 30 percent year on year.

This is already affecting American companies that do business in China. To take one significant example, Apple's revenue in the Greater China region, which includes Hong Kong and Taiwan and accounts for 18 percent of its overall revenue, dropped 21.5 percent in the second quarter from the same period a year ago.

What American Kids Need

Are you giving more money to your adult children than you are to your retirement plan? For many Americans, this is the tradeoff they're facing. According to a report by Merrill Lynch and Age Wave, U.S. parents spend $500 billion a year on their 18- to 34-year-old adult children – twice the amount they contribute to their retirement savings.

Seventy percent of adults between the ages of 18 and 34 received some sort of parental financial support in the last year, with over half of those between the ages of 30 and 34, the report states. More than half of all millennials acknowledge that they could not afford their current lifestyle without the financial support of their parents.

What are parents paying for? The report shows that they aren’t just helping their grown children with emergencies. Some 60 percent are covering food and groceries, 54 percent are covering cell phones, and 47 percent are helping with car expenses.

A Record Day for the S&P

The S&P 500 Index  hit an all-time intraday high on Wednesday, rising above 3,000 for the first time, before closing at 2,993, its second-highest close. More remarkably, of the S&P’s 500 components, a whopping 54 stocks hit intraday highs as well.

Among the more notable names setting new highs:

• PayPal, which is up 42 percent year-to-date
• Lockheed Martin, up 41 percent
• Microsoft, up 36 percent
• Starbucks, up 37 percent
• American Express, up 33 percent
• Costco, up 33 percent
• Oracle, up 33 percent
• Waste Management, up 32 percent
• Walt Disney, up 31 percent
• Dollar General, up 30 percent

The Biggest Earnings Movers

As we close in on earnings season, Bespoke Investments has put together a list of the stocks that tend to move the most when they report their earnings. In first place is TravelZoo, an Internet travel site that has seen its share price move an average of 13 percent, up or down, every time it reports.

The other big movers tend to be smaller stocks the size of TravelZoo - with the very large exception of Netflix. The full Top Ten:

1. TravelZoo: 13.0 percent
2. Netflix: 12.8 percent
3. Stamps.com: 12.6 percent
4. iRobot: 12.2 percent
5. Synchronoss Tech: 11.9 percent
6. Sierra Wireless: 11.8 percent
7. Glu Mobile: 11.8 percent
8. Fossil: 11.7 percent
9. Skechers USA: 11.5 percent
10. First Solar: 11.4 percent

The Winning Sectors

Despite all the good economic news and the continued strength of the stock market, earnings growth is expected to slow to a crawl this year for large U.S. companies. In fact, during the first quarter of 2019, earnings per share declined from a year earlier for most of the S&P 500’s sectors, six out of the total of eleven.

Which sectors were able to grow earnings? These are the fortunate five:

• Health care, 9.8 percent
• Real estate, 7.4 percent
• Financials, 6.2 percent
• Industrials, 5.9 percent
• Information technology, 4.0 percent 

According to S&P Global Market Intelligence, only three of these sectors are expected to continue to show earnings growth when the second-quarter numbers are revealed: Financials, Health care, and Industrials.