Markets “In A Nutshell” for August 5, 2024

Markets “In a Nutshell” for August 5, 2024

Investment Week at a Glance

Stocks finished lower for the week. The Dow Jones Industrial Average fell 2.10%, the S&P 500 was down 2.10%, and the NASDAQ fell 3.40%. Foreign stocks (MSCI EAFE) were up, rising 0.20%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 3.80%.  (Data source: Wall Street Journal)

Fed Leaves Rates Unchanged

As expected, the Federal Reserve left rates unchanged once again as they have stayed the course in the fight against inflation. Fed Chair Powell did hint at a possible rate cut as he stated, “The job is not done on inflation. Nonetheless, we can afford to begin to dial back the restriction in the policy rate.” The market is currently pricing in rate cuts in the last 3 meetings of the year. The market also expects 2 of the 3 rate cuts to be 50 basis point cuts, bringing the target rate from 5.25%-5.50% down to 4.00-4.25% by the end of the year. We know from earlier in the year that these expectations are not always correct, but the quick shift in the expectations does give a reason for the sudden volatility in markets.

July Jobs Report

The U.S. economy added 114,000 jobs in July, below the expected 175,000. The bigger surprise in the report was the unemployment rate coming in at 4.3%, expectations were 4.1%. Although 4.3% is historically low, it is higher than we have seen in the past few years. This also is a sign that the Fed rate hikes are now in full effect as unemployment is rising faster than expected. Wage growth also increased at 3.6% year-over-year, the smallest gain in more than 3 years. This data caused some market volatility in the bond and equity markets. All major domestic indices were down more than 2%, while the bond market was up 2% last week. The market had been calm throughout the year, but it seems we are finally seeing some volatility which was expected as we get closer to Fed rate cuts.

Quiz:

Since 2000, how much does the average bull market return? (Scroll Down for Answer)

1.     97%
2.     119%
3.     136%
4.     155%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer:

4.   155%. The average bull market in the S&P 500 has returned 155% and lasted 4.7 years since 2000. The average bear market declines 36% and lasts 1.3 years.