U.S. leading indicators rebounded in July, a good sign for the durability of the expansion.

The Conference Board’s Leading Economic Index (LEI) rose 0.5% month over month, the biggest gain since September 2018, and above consensus expectations for a 0.3% increase. As shown in the LPL Chart of the Day, Leading Indicators Slowing But Growing, the LEI climbed 1.6% year over year.

The LEI, which we include as one of the “Five Forecasters” of our Recession Watch Dashboard, has yet to turn negative this cycle. The index has fallen negative year over year before all nine recessions since 1955

Minutes from the Federal Reserve’s (Fed) July meeting, released August 21, show the complexity of policymakers’ discussions leading up to the first rate cut of this economic cycle.

Policymakers debated what to do amid strong consumer spending, a solid labor market, tepid inflation, sluggish business investment, financial stability, global risks, and the persistent headwind of trade uncertainty. Ultimately, the Fed announced a 25 basis point (0.25%) rate reduction after a vote with two dissents (Fed presidents Esther George from Kansas City and Eric Rosengren from Boston).

The minutes also reinforced Fed C

Growth stocks have had an unprecedented run of outperformance compared with value stocks for over a decade now. Strong performance has left valuations at extremes, which we used to support our slight preference for value stocks in late 2018 and into 2019. Our economic and interest rate outlooks also pointed to value.

The tide has turned, however.

“The deceleration in economic growth from the U.S.-China trade conflict, the Federal Reserve’s (Fed) pivot to rate cuts, and the collapse in sovereign bond yields may prevent value stocks from reversing growth’s leadership,” said LPL Chief Investment

Challenging Market Environment

It’s been a challenging market recently. Retail sales have been good, the U.S. consumer continues to be the engine of growth, and jobless claims are at 60-year lows. The S&P 500 Index had its best start to a year since 1997—and yet the S&P has been down three weeks in a row!

Let’s Talk About Policy

Trade is the uncertainty in the equation. China’s data continues to be weak, and our stance remains that both the United States and China have so much to lose in a prolonged trade dispute. Although talks are scheduled for September, we thin