August chipped away at July’s gains despite the end of month rally. Small-cap stocks performed the worst. Most of the month witnessed a sell on the news mentality and profit taking. Money Market funds hit an all-time high of $5.58 trillion as $14.37 billion rotated in as U.S. Treasury yields retreated. 79% of S&P 500 companies beat earnings per share estimates.
The Consumer Discretionary sector reported the highest earnings growth out of all 11 sectors in the S&P 500 at 54%. Energy was the best performing sector for the month, while Utilities was hard hit. Overall S&P 500 earnings retreated -4.1% for a third straight year over year decline.
S&P 500: Aug -1.77% YTD +17.40%
DOW: Aug -2.36% YTD +4.75%
NASDAQ: Aug -1.96% YTD +34.09%
Russell 2000: Aug -5.17% YTD +7.86%
Sector Performance YTD:
Communication Services +43.4%
Consumer Discretionary +33.0%
Consumer Staples -2.8%
Real Estate -0.2%
U.S. Treasury Yields:
6 Month Bill 5.47%
2 Year Note 5.00%
5 Year Note 4.37%
10 Year Note 4.27%
30 Year Note 4.37%
The Economy and the Fed:
187,000 jobs were added in August and both June and July job numbers were revised modestly lower. The unemployment rate came in at 3.8% and the data suggests that the strong labor market is slowing down. GDP (Gross Domestic Product) increased 2.1% in Q2 and the latest estimate for Q3 is 5.9%. August’s ISM Manufacturing Survey printed at 47.9, higher than the expected 47.0 and strongest since February this year. The sector remains in contraction but is showing better inventory controls and a pickup in production.
The housing market continues to be tight despite an uptick in construction. With 30-year mortgage rates at roughly 7.53% and limited supply, this should remain constant.
Fed Chair Powell spoke at Jackson Hole and continues to be data dependent. Powell is sticking to the 2% inflation target and the higher for longer stance. The market believes that Powell will not raise the lending rate in September (20th) and may only raise once more for the year in November.
China’s economy continues to struggle. Manufacturing is gaining strength, but exports are falling, consumption is weak, and the property sector is terrible. The service sector has lost over 12 million jobs and China is no longer reporting youth employment stats. It is expected that China will deploy some level of fiscal stimulus, including some deregulation for foreign investors. As it relates to global GDP, expect growth reduction. The U.S. economy won’t be overtaken by China anytime soon.
Historically September is the weakest market month of the year. A potential UAW (United Auto Workers) strike would certainly exacerbate the market volatility. With earnings season in the rearview mirror, it is all about taming inflation and shooting for a soft landing.
The recession topic appears to be losing steam. Stock selection remains key, cash is beneficial and short duration U.S. Treasury Bills are an excellent piece of the puzzle. The S&P 500 is hitting resistance levels but should break through.
We are favoring Energy and Industrials for select opportunities. We anticipate a positive Christmas market rally at year-end. We continue with cautious optimism.
Past Market Commentary
The markets in July continued the positive performance momentum and broadened out from the Technology sector. META (+11.02%) continued its price surge as did Nvidia (+10.46%) and Alphabet (+10.04%)…Amazon, Apple, and Tesla finished slightly positive…Microsoft (-1.36%) gave back some of its gains, and Netflix finished essentially flat for the month. Energy finished +6.76% for the
The markets in May were mixed, with Technology reigning supreme. June didn’t see a reversal of fortunes but added to the positive momentum across most sectors. Apple (+49%) hit and closed at the $3 Trillion value mark. Nvidia (+189%), Microsoft (+42%) and Meta (+138%) continue to march higher on AI news and helped to deliver
The month of May was mixed for the market indices. The S&P500 and Russell 2000 ended essentially flat for the month. The DOW was down more than -3%. The NASDAQ was the star, driven by continued AI fever, and finished at almost +6% for the month. The last trading day saw some profit taking in
The shadow of the bank crisis appears to have lifted with JPMorgan Chase acquiring the assets and deposits of First Republic Bank, the 14th largest U.S. commercial bank. The DOW and S&P500 closed out April with gains, while the NASDAQ finished flat. The small-cap Russell 2000 lost 1.9%. Big Tech has been the market driver.
The opening quarter of 2023 was bifurcated. January was optimistic. That melted away due to the banking crisis and distress in the system. Energy declining escalated the trouble as Technology rebounded from 2022 vigorously. The banks mounted an anxious pall over investor sentiment. March ended with a positive note. The market action shifted markedly, reversing major losses from last year. The month end market move was encouraging,
A short time ago Jamie Dimon, the CEO of JPMorgan Chase, reported the message that a “financial hurricane was possible.” He was quickly reprimanded in the press for fear mongering. This past week Silicon Valley Bank, a large California banking enterprise with a national footprint (16th largest in the country), announced they’re closing down. Silicon’s