In Markets "In a Nutshell"

Markets “In a Nutshell” for September 3, 2024

Investment Week at a Glance

Stocks finished higher for the week. The Dow Jones Industrial Average rose 0.90%, the S&P 500 was up 0.20%, and the NASDAQ fell 0.90%. Foreign stocks (MSCI EAFE) were up, rising 0.60%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.91%.  (Data source: Wall Street Journal)

Dow Closes at All-Time High

The Dow Jones closed at an all-time high on Friday to end the month of August. This comes after a rough start to August when the Dow dropped over 1,000 points in a single day and the overall market nearly entered 10% correction territory. Some better economic data and the outlook of a Fed rate cut helped turn the market around throughout the month. Strong earnings also supported the market rebound as the market continued to broaden out. Tech continues to trail the overall market as it was the 3rd worst performing sector in August. Almost all companies have reported Q2 earnings and 80% of companies beat analyst expectations by an average of 5.2% Although the S&P 500 is not at an all-time high, the equal weight S&P 500 is, meaning the volatility in the market helped the majority of the companies play “catch-up” to the mega-cap names.

Bond Performance & Rate Cuts

Bonds have had a rough run of late as the Fed raised rates to combat inflation, but that has changed in the past few months. When we look at bond performance following a Fed rate cut, there could be some more good news for bond performance. In the following 12 months following the first rate cut, bonds have been positive for the past 9 cycles. The average 12-month return for bonds has been 10%, the best return coming in 1984 when the following 12 months from the rate cut, bonds were up 22%. With history showing us that both bonds and stocks perform well in the following 12 months of a rate cut, you can see why investors have been waiting for the Fed to cut rates as they are hopeful history can repeat itself.

Quiz:

What is the worse months historically for the stock market? (Scroll Down for Answer)

  1.    January
  2.    June
  3.    September
  4.    December

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer:

3.  September.  The stock market is historically the worst in the month of September. However, it does tend to set the table for Q4 which is historically the best quarter of the year for stocks.