The Monthly Market Wrap provides an insightful analysis of treasury yields, fixed income performance, mega-cap stocks, and key economic indicators in August 2024. It also delves into housing market data and the performance of commodities.
Key Stock Market Index Performance
The equity pullback continued into the first week of August but most indices regained a substantial amount of their losses by month’s end. The S&P 500 rose 2.4% in August, the Dow Jones Industrial Average advanced 2%, and the Nasdaq Composite added 0.7%. The one laggard on our chart (below) was the small-cap Russell 2000 index which, after surging 10.2% in July, retreated 1.5% in August.
On a percent-off-high basis, the S&P 500 ended August just 0.3% away from a new all-time high, while the Dow Jones has fully regained its losses. The Nasdaq Composite remains 5% below its all-time high, but has come a long way from as much as a 13.1% drawdown earlier this month.
Just two of the eleven sectors finished August in the red: Consumer Discretionary, which fell 0.2%, and Energy, which gave up 2.1%. The rotation into Value stocks gained momentum as Consumer Staples, Real Estate, and Health Care all posted gains of over 5% in August. Utilities and Financials were not far behind, advancing 4.8% and 4.6% in the month, respectively.
Economic Data
Employment
The unemployment rate rose to 4.3% in July, marking the fourth straight monthly increase. According to the latest nonfarm payroll data, 114,000 jobs were added in July, falling short of the expected 175,000 and marking the second-fewest monthly job gains since December 2020.
The unemployment rate dominated financial headlines in August because its rise of 0.5 percentage points from its 12-month low of 3.8% triggered the “Sahm Rule”, which serves as an early warning sign of a possible recession. However, the rise in unemployment and weaker-than-expected job gains come as the labor force participation rate rose to 62.7% in July, making economists assess if things will be different this time.
Inflation vs. Fed Funds Rate
The US inflation rate dove further below 3%, setting at 2.89% in July; core Inflation came in at 3.17%, declining for the 15th month out of the last 16. The US Consumer Price Index rose 0.15% MoM, and US Personal Spending MoM surged a half percent higher.
The Federal Reserve held its key Fed Funds Rate at 5.50% for the eighth consecutive meeting on July 31st, 2024; however, markets are expecting a rate cut at the next FOMC meeting on September 18th.
Related: Interest Rates Demystified: From Federal Funds to Your Finances
Housing Prices and Mortgage Rates
US New Single-Family Home Sales surged 10.6% MoM, and Existing Home Sales increased 1.3% MoM. The Median Sales Price of Existing Homes retreated from its all-time high by 1% to $422,600 at the end of July. Mortgage rates continued to fall as hints of a September rate cut rippled through markets; the 15-year Mortgage Rate tumbled 48 basis points in August to 5.51% while the 30-year slipped 38 basis points to 6.35%, both as of August 29th.
Fixed Income
Treasuries repeated their activity patterns from July: yields declined across the board and the middle of the curve posted the largest MoM declines. The 1-year T-Bill and 2-year note logged the largest yield declines, shedding 35 and 38 basis points, respectively.
Bond funds added further gains due to declining yields. The iShares 20+ Year Treasury Bond ETF (TLT) advanced 2.1% and the iShares iBoxx Investment Grade Corporate Bond ETF (LQD) rose 1.9%, the largest increases of bond funds tracked on our chart
Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
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