CWG Investment Committee: August Heat with Little Fire
August started out with a 6% stock market decline but managed to erase all the damage by the month end. The S&P 500 posted a solid gain of 2.3% for the month. The Nasdaq ticked up 0.6% and the Dow rose 1.8%.
The sharp selloff was caused by concerns about slowing economic growth after the July payrolls report missed expectations. The decline gained momentum when the Japanese Yen gained strength and leveraged traders were caught offsides.
The market rebounded in the last two weeks of the month as better economic data came in and the Fed signaled that they would start the long-anticipated rate cutting cycle in September.
The S&P 500 rallied 18.4% in the first eight months of 2024, nearly matched by the Nasdaq Composite at 18.0%. The Dow Jones Industrial Average continues to trail having increased 10.3% over the same period.
In the past few months, the market gains have broadened into defensive areas sectors: Utilities, Consumer Staples, Health Care, and Real Estate.
Bonds of longer dated maturities have come alive as the Fed is poised to lower their funds rate later this month and gradually continue an easing course into 2025.
Lower rates across the spectrum have helped assets like gold to outperform stocks YTD.
Inflation is heading towards the Fed's 2% target as unemployment creeps higher. A soft landing has become a consensus forecast for the U.S.
The combination of a rate cutting cycle and a growing economy bodes well for stocks historically.
The rest of the world continues with slower but positive growth. China is having hard times while India expands better than 7% for GDP.
As we all know, November elections loom. The rhetoric is going to be divisive, and September is historically the worst for stocks in a typical year. According to Bloomberg data, the S&P 500 has had an average return of -4.2% over the last five years.
Global and U.S. political uncertainty may very well last into Q4 2024.
Tax policies created in 2019 are up for review in 2025.
Given the returns year-to-date, with only brief drops in market averages, we would be unsurprised by a rocky month or two ahead.
It is a good time to review your portfolios and make sure your goals and plans for the future are clearly defined.
We look forward to working with you to meet your needs and aspirations.
Enjoy the cooling weather!