EFTA01458016.pdf

Perspective from Larry V. Adam, U.S. Wealth Management CIO and Chief Investment Strategist Summer Doldrums Setting In Economic Data: Par for The Course While financial market volatility increased on the As we expected, one of the primary reasons the back of the Greek crisis and dramatic decline in the Fed was noncommittal with its timing of the first Chinese equity market (-32% from its recent peak), rate hike with Wednesday's FOMC post-meeting markets have stabilized. In fact, month-to-date announcement was they did not have the Q2 2015 through Thursday, the S&P 500 has rallied —2.3% GDP and employment figures at their disposal. and the 10-year Treasury yield has fallen -9 bps. Yesterday's rebound in Q2 GDP (+2.3% QoQ) and The eye-popping stat was the intra-month "bear upward revision to Q1 GDP (from -0.2% to 0.6% market" (fall of more than 20%) decline in oil. QoQ) is welcome news for the Fed and increases Moving into August, markets should remain range the likelihood of a September rate hike. bound in what is traditionally a seasonably slow Given the importance of economic momentum, volume and muted performance month. The Q2 next week's economic releases are expected to 2015 earnings season is in its latter stages with support the current trajectory of the economy with most of the systematically important bellwethers little change. After recently surging to its highest having already reported earnings. With eamings pace since July 2005, motor vehicle sales growth coming in better than expected (but still in (Monday) for July are expected to remain above a slightly negative territory) and Q3 2015 earnings 17 million annualized pace (consensus 17.2 simultaneously being revised lower (very typical), million). there were no major surprises to earnings season. The ISM manufacturing index (Monday) for July is The Fed's next FOMC (Federal Open Market expected to remain steady in expansionary territory Committee) meeting is not until September 17-18 at 53.5 (unchanged from last month). In particular, and includes updated forecasts, "dots" (showing the focus on the new orders and back orders dispersal of FOMC policy-makers' views) and subcomponents as they are better predictors of Yellen's press conference. But until then, the Fed is future economic activity. likely to digest incoming data and remain "data The employment report for July will be released on dependent." However, if we are correct with our Friday. Our economist forecasts that 235K jobs September first rate hike expectation, volatility were added in July and that the unemployment rate should increase post Labor Day. A near-term should remain unchanged at 5.3%. The estimated calmness surrounding the Fed should contain the number of jobs for July is consistent with the dollar and support a stabilization in commodity average monthly pace of -208K jobs created YTD. prices, which are currently oversold. Given the Fed's emphasis on employment conditions (both job creation and wages), this is one of two reports the Fed will have before its next meeting. Larry Adam, I U.S. Wealth Management CIO and Chief Investment Strategist Deutsche Asset & Wealth Management CONFIDENTIAL — PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0 117767 CONFIDENTIAL SDNY_GM_00263951 EFTA01458016