TSX up after index logs fresh record high close
Investing.com - Goldman Sachs has lowered its third-quarter GDP growth forecast to 1.6% from 1.7% following recent economic data releases, while maintaining its domestic final sales estimate at 0.7%. This forecast revision comes as the S&P 500, tracked by SPY, trades near its 52-week high of $649.48, with a robust year-to-date return of 10.49%. InvestingPro data shows the market maintaining strong momentum despite economic headwinds, with a P/E ratio of 14.65.
The downward revision comes after July’s trade deficit widened, primarily driven by increases in gold imports and imports from China. Goldman noted that the details of the trade balance report were "slightly softer" than their previous GDP tracking assumptions.
Recent productivity data showed some positive trends, with nonfarm productivity revised upward by 0.9 percentage points to 3.3% in Q2 on a quarter-over-quarter annualized basis. The year-over-year rate was revised up by 0.2 percentage points to 1.5%, while unit labor costs were revised down by 0.6 percentage points in Q2 to 1.0%.
The ADP employment report indicated private sector employment rose by 54,000 in August, slightly below consensus expectations. Goldman maintained its forecast for August nonfarm payroll growth at 60,000 compared to the consensus estimate of 75,000 ahead of Friday’s employment report.
Initial jobless claims rose more than expected, with increases concentrated in Connecticut and Tennessee, though continuing claims declined. Goldman’s wage tracker now stands at 3.9% annualized in Q2 and 3.7% year-over-year.
In other recent news, Raymond James has reported that small cap value is the only investment style currently trading below its long-term price-to-earnings average. The firm described the recent earnings period as historically strong, noting that eight out of eleven market sectors experienced positive earnings revisions. Meanwhile, Goldman Sachs identified policy news and Federal Reserve speeches as key catalysts for the market this week, following increased market volatility. According to the investment bank, both implied and realized volatility have risen, reflecting market reactions to challenging economic data.
Boston Federal Reserve President Susan Collins has advocated for patience regarding interest rate changes amid economic uncertainty. Collins emphasized the importance of carefully assessing incoming data, given the solid economic conditions. In a separate analysis, Citi’s Chris Montagu warned that Nasdaq positioning is reaching stretched levels, potentially increasing profit-taking risks. Additionally, Citi forecasts a rise in the unemployment rate to 4.4% in the upcoming June jobs report, with payroll job growth expected to slow. Despite weak hiring indicated by jobless claims data, layoffs are not seen as increasing at a concerning rate.
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