August Market Recap
It’s not how you start, it’s how you finish.
If stocks were an Olympic sprinter, they would have begun August with a major stumble out of the blocks. Fortunately, US equities were able to recover and hit their stride. By the time Labor Day weekend arrived, all three major indices had clocked positive returns.
The Dow Jones Industrial Average ended August at an all-time high. The S&P 500 was up for the ninth time in the last 10 months and has surpassed the NASDAQ in terms of year-to-date returns.
Nine of the 11 equity sectors netted gains, led by Consumer Staples (+5.8%) and Real Estate (+5.6%). Energy (-2.3%) and Consumer Discretionary (-1.1%) were the only sectors to move lower. For the second month in a row, the tech-heavy Communication Services and Technology sectors underperformed.
Benchmark Returns: August 2024 | YTD 2024
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Dow Jones
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S&P 500
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NASDAQ
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+1.76% | +10.28%
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+2.28% | +18.42%
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+0.65% | +18.00%
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|---|
The S&P 500 lost 6% in the first three trading days of August, then bounced 9% from those early-month lows.
There were no meetings of the Federal Reserve’s Open Market Committee last month, which meant prolonged speculation about its next meeting on September 17-18, when the Fed will almost certainly cut interest rates.
None of the economic data released in August changed the forecast of imminent rate cuts. Inflation fell below 3% for the first time in 3 ½ years as measured by the Consumer Price Index (2.9%). The other oft-cited inflation metric, Personal Consumption Expenditures (PCE), showed 2.5% year-over-year inflation. Even European inflation fell significantly down to 2.2%.
Fed Chair Jerome Powell acknowledged the inevitability of rate cuts on August 23. “The time has come for policy to adjust,” Powell said. “The timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
September will be the first of three Fed meetings prior to year-end and markets suggest between 0.50% to 1.00% of total cuts between now and then.
Ten-year US Treasury yields fell below 4% on the first day of August and remained there the entire month. Treasuries yielded 3.91% on August 31, down from 4.5% two months ago.
Lower bond yields coincided with a drop in US mortgage rates, which boosted the real estate market. US home sales increased in July from a month earlier, snapping a 4-month string of declines.
With all but seven companies in the S&P 500 having reported Q2 earnings, we’re headed toward more than 12% blended earnings growth from a year earlier. That’s double the 6% earnings growth in Q1 and the strongest quarterly earnings for the S&P in nearly three years. The Technology, Financials, and Health Care sectors all grew earnings north of 20%.
Second-quarter GDP was revised higher to show 3% annualized growth (up from the initial 2.8% estimate released in late July). Most of the difference was attributed to personal spending.
Non-US Developed equities outperformed in August. The MSCI EAFE Index was up 3.3%. Emerging Markets increased 1%.
West Texas Intermediate Crude oil fell 4% in August to $73.55 per barrel. Oil prices are more than 15% lower than they were two months ago and trade near their 2024 lows.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
Marks Group Wealth Management performs in-house analysis on companies. Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings. The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice. Additional information is available upon request.
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Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
