Markets “In a Nutshell” for August 14, 2023
Investment Week at a Glance
Stocks finished mixed for the week. The Dow Jones Industrial Average rose 0.60%, the S&P 500 was down 0.30%, and the NASDAQ fell 1.90%. Foreign stocks (MSCI EAFE) were up, rising 0.50%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.16%. (Data source: Wall Street Journal)
Stocks Pull Back to Start August
After a strong start to 2023, stocks have cooled off to start August. The NASDAQ, which has led the way in this rally, is down over 5% in August. Despite the weak start to August, markets remain strong as the S&P 500 is roughly 6% from its all-time high after a rough 2022. Another positive for markets is that the earnings growth forecast shows a rebound in Q3 & Q4 of 2023 and 2024 estimates of 11.6% earnings growth. This comes after a decline in earnings in the past few quarters for the S&P 500. If we see a further pullback in markets it could be a good time for investors who have missed out on the rally to get back in as some worries of the market have gone away. The Fed seems to be finished raising rates and inflation is now at much lower levels which was the main focus of the market over the past 18 months.
Economy Continues to Look Strong
The market seems to be shifting to the idea that we will be able to avoid a recession as economic growth has been better than expected. The Fed’s 3rd quarter GDP growth estimate is now 4.1% which shows just how strong the economy has been recently. Many thought a recession was going to happen no matter what but as we may have reached the end of rate hikes and the economy still growing, we may be able to avoid a recession. We could even begin to see the Fed cut rates in the 1st half of 2024 if inflation continues to come down to its target level of 2%. This would give a boost to the economy as well as the market as higher rates put stress on the economy as a whole.
What was the CPI reading for July of 2023? (Scroll Down for Answer)
Have a Great Week!