In Markets "In a Nutshell"

Markets “In a Nutshell” for August 12, 2024

Investment Week at a Glance

Stocks finished lower for the week. The Dow Jones Industrial Average fell 0.60%, the S&P 500 was flat, and the NASDAQ fell 0.20%. Foreign stocks (MSCI EAFE) were also down, falling 1.20%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.94%.  (Data source: Wall Street Journal)

Market Swings

Last week the market had one of the more volatile weeks we have seen in the past couple of years. On Monday, the Dow Jones dropped 1,034 points, its 12th largest single-day decline in the history of the index. Although a 1,000-point decline is not fun no matter how you spin it, it is important to realize that it was a percent decline of 2.6%. In comparison when we saw a 1,033-point decline in 2018, that was a 4.2% move. The good news for the week was that the market bounced back a little and was only down slightly for the week. The other good news is the market is still within 5% of its all-time high. It is important for investors to stick the course in these situations as sometimes people sell when the market is down and miss out on the way back up.

Bond Performance

Bonds have not had the best run in recent years as rates have risen. This has changed recently as rates have begun to fall over the past 6 weeks. Since the beginning of July bonds have gained more than 4%, helping portfolios that have some fixed-income exposure not feel the full effect of the equity market dip. The 10-year Treasury yield went from 4.48% to 3.78% from July 1st to August 5th as worries of a possible recession increased as new employment data came in. The lower rates also forecast the Fed cutting their target rate in the coming meetings as we move closer to beginning a rate cut cycle. This will typically help bond performance as when rates go down bond prices increase. The market currently has 1% of rate cuts priced in by the end of the year.

Quiz:

How much is the Dow Jones up on the year? (Scroll Down for Answer)

  1.     1%
  2.     3%
  3.     5%
  4.     7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer:

3.  5%. The Dow Jones is up 5% for the year despite the recent dip. It is always good to look at the longer term returns of the market as ups and downs can be expected throughout the year.