Below is a breakdown of this morning’s Q2 GDP release, which came in at +4.1% — weaker than expected but still strong nonetheless. Consumption was much stronger thanks in part to lower withholding taxes in paychecks, but that one-time growth bump won’t carry forward to later quarters. Expect strong, but much less robust, consumption growth going forward. Trade was also a huge boost to overall GDP, adding 1.1% to growth in Q2. Soybeans especially, but other crops in general, helped push up exports as sellers rushed goods overseas to beat tariff deadlines. That will likely move the other direction in Q3. Government added to growth but not dramatically, a reasonable pace that may fall a bit but doesn’t look out of line. Fixed investment was notably slower in Q2 than Q1. While still contributing a very healthy 0.9% in Q2, the fall is worth keeping an eye on, especially given slowing leading indicators for capital expenditures from business. Finally, inventories plunged, dragging down growth by 1% QoQ SAAR. Inventories look ridiculously low, and can’t continue to subtract from GDP at the pace they have been over the last few years.

Below is a chart showing the S&P 500’s price return year-to-date and the impact that the five FAANG (FB, AAPL, AMZN, NFLX, GOOGL) stocks have had. While Facebook’s horrific reaction to earnings and the worst day in the stock’s history had a negative market impact, the overall performance of the market YTD has been supported by the group. While they’re only a 13.6% weight in the S&P 500’s market cap, they’re driving the market up to the tune of almost half of its YTD gains. Impressive stuff for 5 stocks on their own, even in spite of Facebook’s brutal collapse.

As shown below, 73% of S&P 500 companies begin the day above their 50-day moving averages, and six of eleven sectors have readings stronger than 73%.  This is a sign of healthy underlying breadth for the market.

As shown in the snapshot of our Trend Analyzer tool below (available to Bespoke Premium and Bespoke Institutional members), every sector is now back above its 50-day moving average.  This is a sign that the market is back to getting broad participation — something that wasn’t the case a few weeks ago when it was only Tech and Consumer Discretionary driving the gains.

While recent residential housing data has been showing some cracks, the employment picture continues to look robust.  This week’s latest read on initial jobless claims provides the latest example.  Although the report came in slightly higher than expected (217K vs 215K), by just about any measure it’s an extraordinarily low reading.  As we update readers every week, this week’s reading marks the 42nd straight week where claims have been at or below 250K and the record 177th straight week where claims have been under 300K.

With another sub 220K reading, the four-week moving average also started to move meaningfully lower this week, falling from 220.75K down to 218K.  This reading is now within 5K of its multi-decade low of 213.5K from early May, and if next week’s reading comes in below 214K, we’ll see a new low.

On a non-seasonally adjusted (NSA) basis, jobless claims fell from 232.2K down to 201.3K.  For the current week of the year, this is the lowest reading on record, and going back to 2000, it is more than 134K below the average for the current week.

In the last two weeks, the S&P 500 has rallied 1.5% and broken out above significant resistance at the 2,800 level.  With that kind of move, you would expect to see an uptick in optimism from individual investors.  Based on the latest AAII survey data, though, we have seen the opposite.  According to this week’s report, bullish sentiment declined for the second week in a row, falling from 34.66% down to 31.52%.

As bullish sentiment declined, bearish sentiment ticked up from just under 25% to just under 27%.

The plurality of investors, however, are still on the fence.  As shown in the chart below, neutral sentiment in this week’s survey increased from 40.4% up to 41.58%.  That’s the highest level since mid-May.  Sentiment is a major driver of stock prices and is a topic we cover regularly in reports for clients.  To stay on top of the latest sentiment trends, you can start a two-week free trial to Bespoke Institutional.