Humans are linear thinkers. After a very wet July and a hurricane, some of us are thinking we may be in this wet pattern for the rest of the year. We are quick to forget the painful summer drought of 2023. The same holds true as we think about investing... the short-term past dominates how we think about the future. Because of this, we thought it helpful to provide a brief update on the markets.
Stock Market
The stock market is off to an ugly start for the month of August primarily because the monthly job figure came in much lower than expected. Historically, this economic indicator has been a sign of a slowing economy. With that being said, 2024 has been a good year for stocks. As a reminder, the stock market typically suffers a 10% pullback once a year and a 20% pullback every 2 to 3 years. We believe these corrections are “healthy” for the long-term viability of the markets as pullbacks remove the excess speculation. We are in the middle of earnings season and a majority of companies have reported better than expected earnings. (Source: FactSet)
Bottom line… we are not worried about the earnings of the overall market which is the main component of a rising/falling stock market.
Bond Market
In a stark contrast, the bond market has gotten off to a great start in August due to interest rates moving lower. Over the past two days, bonds have done what they are supposed to… they have acted as a “ballast to the ship” when stocks are down. (Source: FactSet)
Federal Reserve & Interest Rates
One welcome sign is the green light that the Federal Reserve has signaled they will reduce interest rates this year… some suggest as early as next month. How many interest rate cuts will follow remains a question mark, but it will likely be at least several. With the inflation rate (not to be confused with price levels) now falling to 3%, we believe there is room for the Fed to cut interest rates. (Source: FactSet).
While this is good news for borrowers, the negative for savers is that money market interest rates could also be moving lower later this year.
About the Author
Matt Price serves as a Partner and Managing Director for The Price Group of Steward Partners. He resides in Houston with his wife, Emily, their four children and "Fisher" the family golden retriever. Matt studied at the University of Pennsylvania – Wharton School of Business for his Certified Investment Management Analyst (CIMA®) designation after receiving his undergraduate degree from the University of Tennessee - Knoxville. Over the past 12 years, Matt has helped families make high quality, common sense decisions regarding their wealth and their legacy. Matt firmly believes everyone needs a wealth coach!
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The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. All investing involves risk including possible loss of principal. Past performance is no guarantee of future results.
Equity securities may fluctuate in response to news on companies, industries, market conditions and the general economic environment. Companies cannot assure or guarantee a certain rate of return or dividend yield; they can increase, decrease or totally eliminate their dividends without notice.
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