CWM September Newsletter: August Recap

1. Indices – Market Performance Review

    a. August & Year-to-Date

2. August Recap

    a. Markets

                i. What Happened: August was a turbulent month, with the S&P 500 initially dropping 8.5% in the first half. However, the market rebounded strongly, and the S&P ultimately rose for a fourth-straight month.

                ii. Why It Matters / Under the Hood:

1. Despite growing recession fears earlier in the month, driven by a weak July unemployment report, several strong fundamental factors continue to support the growth of the U.S. economy and stock market.
2. Market Data:

a. The S&P 500 is on track for its best earnings season since Q1 2022, with profits up about 12% year-over-year.                  

b. Additionally, seven out of the 11 sectors have outperformed analyst expectations, indicating a shift away from reliance on big tech.

3. Economic Data:           

a. Q2 GDP was revised upward: from 2.8% to 3%, reflecting robust 3% growth in the U.S. economy, driven by strong consumer spending. This marks an improvement from the 1.4% growth in Q1.                  

b. Inflation is trending down: The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) index, rose at a 2.5% rate in Q2, down from 3.4% in Q1. With the Fed targeting a 2% rate, this is a positive development.

3. Looking Ahead

a. All attention will be on the Federal Reserve's meeting this month. They're now expected to start cutting interest rates next month, marking two years since they began their rate-hiking cycle in September 2022. 

b. Powell and the Fed have indicated that the labor market has overtaken inflation as the primary economic risk. The unemployment and payroll data for August was released September 6th, and the results were mixed, as job creation in June & July slowed but unemployment remained relatively low.

c. While the Fed's direction seems clearer now, the pace and scope of the rate cuts remain uncertain.

Stay tuned for our next investment update, where we'll recap September and look ahead to the upcoming election.