Disinflation Trend Getting Close to the Conclusion: The July CPI reading showed consumer prices up only 2.9% y/y, the first reading below 3% since March 2021.
Equity Markets Continued to Advance in August: Staples and Real Estate led the way in August, pushing the S&P 500 to finish up 2.4% for the month. The index is now up greater than 19% in 2024.
Fixed Income Market Rally Continues: Yields fell again in August, with the 10-year closing the month at 3.9%, down over 10bps for the month and 80bps since the recent peak in late April.
“The Time has Come for Policy to Adjust” Fed Chair Jerome Powell set the stage for rate cuts during his press conference at the Federal Reserve’s Jackson Hole symposium.
Data Over the Last Year Has Been Consistent with our View: With inflation falling and the economy continuing to grow, the key themes we have been discussing for more than a year have largely played out consistent with our view.
Equity Markets
Equity markets got off to a rocky start in August as several factors came together to cause a brief selloff in prices and an (almost unprecedented) increase in volatility. Various reasons were cited for the selloff, including the unwinding of multiple popular hedge fund trades and some weaker than expected economic data. The S&P 500 bottomed on August 5th, falling a total of 6% in 3 trading days. The VIX (a measure of expected volatility over the next 30 days in the S&P 500) registered its 3rd highest reading going back to the Financial Crisis.
At the time, we wrote “Media headlines are meant to drive clicks and eyeballs. We advise to focus on the fundamentals.” Cooler heads quickly prevailed, with the S&P 500 regaining all of the losses by Friday, August 9th and the VIX falling below its closing July value. The index closed August up 2.4% for the month and is now higher by over 19% for the year.
Staples and Real Estate were the two best performing sectors, both up greater than 5% for the month. Energy (-3%) was the worst performing sector for the month, as falling oil and natural gas prices hit equity values. Consumer Discretionary (-2%) was the only other negative contributor on the back of several negative earnings reports from companies in the sector. For the year, Financials have now joined Technology and Communication Services as sectors that are higher by greater than 20%.
A Normalizing Economy
A Normalizing Economy
A Normalizing Economy
Highlights
Equity Markets
Equity markets got off to a rocky start in August as several factors came together to cause a brief selloff in prices and an (almost unprecedented) increase in volatility. Various reasons were cited for the selloff, including the unwinding of multiple popular hedge fund trades and some weaker than expected economic data. The S&P 500 bottomed on August 5th, falling a total of 6% in 3 trading days. The VIX (a measure of expected volatility over the next 30 days in the S&P 500) registered its 3rd highest reading going back to the Financial Crisis.
At the time, we wrote “Media headlines are meant to drive clicks and eyeballs. We advise to focus on the fundamentals.” Cooler heads quickly prevailed, with the S&P 500 regaining all of the losses by Friday, August 9th and the VIX falling below its closing July value. The index closed August up 2.4% for the month and is now higher by over 19% for the year.
Staples and Real Estate were the two best performing sectors, both up greater than 5% for the month. Energy (-3%) was the worst performing sector for the month, as falling oil and natural gas prices hit equity values. Consumer Discretionary (-2%) was the only other negative contributor on the back of several negative earnings reports from companies in the sector. For the year, Financials have now joined Technology and Communication Services as sectors that are higher by greater than 20%.
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