Schwab Market Perspective: Different Speeds

Sometimes it feels like the economy and markets are on different tracks. Although leading economic indicators have been flashing recessionary signals, the S&P 500® index has plowed higher. Manufacturing activity is weak while services is resilient. The Federal Reserve declined to raise short-term rates at its June meeting for the first time in more than a year—but made it clear the door is still open to future rate hikes. Meanwhile, Europe is in a recession and a bull market at the same time.

As we enter the second half of the year, clarity remains elusive. We see positive signs ahead, but also potential risks.

U.S. stocks and economy: Bifurcations

Approaching the end of the first half of the year hasn't yielded much economic clarity. There remains a relatively strong bifurcation between certain segments of the economy—be it manufacturing (weaker) and services (resilient), or leading economic indicators (weaker) and their coincident peers (resilient), which has mostly been reflected in the stock market.