Mixed but relatively positive data was the right combination for U.S. stocks last week. A revised second quarter GDP growth estimate of 3% and strong manufacturing data offset with weaker employment and wage data showed progress but not at a pace that would imply another rate hike is imminent. As Congress works on tax reform and the upcoming debt ceiling deadline in the weeks to come, the enormous restoration efforts that will be required to clean up the catastrophic damage of Hurricane Harvey have just begun. Also of concern, earlier in the week North Korea launched another missile over Japanese airspace despite a cooling of rhetoric between the US and North Korea over the past few weeks.
After a rough start to August for U.S. stocks, the positive returns in the last half of the month were enough to allow large cap stocks to slide into the black for the month. Through Friday, September 1st, year-to-date returns for large caps are a solid 11.9% in the face of the mixed economic and geopolitical data. Small cap stocks took a much larger hit in August and are only up less than 2% from the beginning of the year. International and emerging market returns, while recently mixed, continue to dominate in 2017 with emerging market returns nearing 30% since January 1. Given the weaker inflation data, rates have stayed low giving bond funds decent mid-single digit returns since the beginning of the year.