Market Update: August 26, 2024
Economic data for the week included stronger new and existing home sales reports, along with mixed PMI manufacturing and services sentiment, and a weaker month from the index of leading economic indicators.
Equities gained globally last week, along with further hints of easing central bank policy. Bonds similarly gained as yields fell. Commodities were mixed, with stronger metals and weaker crude oil prices.
U.S. stocks ended positively for the week, despite low summer trading volumes, with decent economic results and the dovish tone of the FOMC July minutes. Gains culminated on Fri. by the further dovish tone of Fed Chair Powell’s Jackson Hole speech. Nearly every sector saw gains last week, led by materials, consumer discretionary (largely helped by Target and TJX), and industrials, while energy experienced a minor decline. Real estate also rose nearly 4% on the sentiment surrounding lower rates, which has been one of the primary drivers of that sector in the near-term. Small cap reacted especially strongly to the hints of upcoming rate cuts, as would be expected. Focus remains on the consumer, with added sensitivity to signs of potential weakness in corporate earnings commentary, as well as the mix of product type and purchaser demographic/income level.
Foreign stocks benefitted by the decline of over a percent in the value of the U.S. dollar for the week, with Japan, Europe, and the U.K. all outpacing the S&P 500. This went along with broader global hopes for rate cuts by the ECB as well as the U.S. Fed at their Sept. meetings, resulting in easier policy through the majority of the developed world. European PMI also gained a bit of a boost from this month’s Paris Olympics, in addition to stronger activity in the U.K. Japanese sentiment was reassured after recent volatility, despite central bank commitments to normalizing policy rates higher—although it’s assumed this will be done in a careful manner. Emerging market countries earned positive returns, but lagged developed for the week, as gains in India, Korea, and Taiwan outweighed declines in Mexico and Turkey, the latter continuing to lie in a quandary of inflation remaining sticky but short-term policy rates held steady at 50.0%, one of the highest rates in the world.
Bonds fared positively as yields fell, along with increased expectations for Fed policy easing in Sept., due to both the downgrade in last year’s employment numbers and Powell’s speech. Investment-grade and high yield corporates outperformed U.S. Treasuries slightly, and beat senior floating rate bank loans, although the latter also saw small gains. Unhedged foreign bonds benefitted from the sharp drop in the dollar.
Commodities were mixed, with sharp gains in industrial metals (mostly led by zinc), followed by lesser gains in precious metals and agriculture, while energy prices fell back. Crude oil prices fell a percent last week to $75/barrel.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.