US economic reports released in July showed increasing strength, breaking past the 2% real growth rate which has been somewhat of a norm since 2009. Real growth is up 2.8% in the past year, while real GDP growth in the second quarter alone grew at 4.1% annual rate which is its fastest pace since 2014. Wages and salaries are growing at its fastest pace in nearly a decade and, as a result, consumption numbers are also solid. The strong economic data can be attributed to tax cuts and increased government spending.
The story of June 2018 in the markets has been dominated by headlines surrounding global trade tensions. Other themes persist throughout the market such as rising interest rates, geopolitical uncertainty, and volatility in the financial markets.
In May we saw geopolitical risks continue to loom large and add to the volatility in global equity markets. Specifically, in the Eurozone. Italy is having difficulties forming a government and the rise of populist anti-euro parties are gaining momentum. This is causing concerns that Italy may leave the Euro and is adding more uncertainty to European markets.