Weekly Market Update
By Michael McKeown, CFA, CPA - Chief Investment Officer
Chart of the Week
Over the last two months, the S&P 500 Index came back from its nadir on June 16th. It has made up over half of its decline in value thus far. Going back to 1973, there were five times the index fell more than 23% in price as it did in the first five months of the year (the other years were 1974, 1987, 2002, 2008, and 2020). Despite these difficult periods, prices eventually recovered in the past.
This year, investors became pessimistic and positioned accordingly, given the unclear outlook. With companies strong earnings and inflation data backing off, equities moved higher. The positive tone collides with a challenging part of the calendar year. There remain headwinds such as declining housing starts and manufacturing orders along with central bankers hiking interest rates. Midterm elections will soon come into focus, which often has been a positive catalyst for markets.
What We’re Reading
3 Rare and Powerful Skills – Morgan Housel
The Inflation Moderation We Expected Should Continue – Guggenheim
Thoughts from the Road: Keeping Perspective – KKR
Venture Capital’s Silent Crash: When the Tech Boom Met Reality – Financial Times
Podcast of the Week
The Fed Will Break Inflation’s Back, No Matter What – The Macro Trading Floor
The Past Week
The inflation report coming in with a 0% change month over month was the story last week. In addition, the Producers Price Index fell by 0.5%, failing expectations of a rise of 0.2%. Bond yields increased on this news while equity markets staged a strong rally. Investors are beginning to assess whether the inflation data will continue moderating. Consumer sentiment improved as well.
The Week Ahead
A quiet week of data is ahead. The retail sales report will get the most attention. The following week has the annual Economic Policy Symposium at Jackson Hole, Wyoming. Central bankers and policymakers will gather to discuss the issues that face world economies.
Due to business travel next week, we will take a break from the Weekly Market Update. Look for our next update on August 29th.
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