From the desks of Stanley Katz & Lauren Madera
HAPPY NATIONAL LAZY DAY! CELEBRATE ACCORDINGLY.
The three major U.S. stock market indices delivered a stunning turnaround this week (i.e., DJIA: +1.35%, S&P 500: +2.43%, Nasdaq: +3.87%), rebounding powerfully from the August 1 “jobs shocker.” Argus Research described July’s employment report as a “clear deceleration in the employment economy,” with just 73,000 new jobs added and severe downward revisions to prior months. The three-month average for job growth plummeted to a mere 35,000. This economic reality check initially sent markets tumbling, but investors quickly pivoted to view the weak data as a catalyst for potential Federal Reserve rate cuts. As of August 8, the CME FedWatch Tool estimates the odds of a September rate cut at over 88%.
This week’s rally exemplifies how modern markets can transform apparent bad news into bullish momentum. CFRA’s Sam Stovall warned that August historically ranks among the worst months for stocks, particularly in second-term presidential years, where the S&P 500 has declined every August since Eisenhower. However, the current environment may defy conventional wisdom. Through July’s high, the S&P 500 had surged 28% from April’s correction low, accompanied by reduced volatility and a 41% premium to 20-year average valuations. Stovall notes that, of the five times since 1950 when the S&P 500 started with a correction, all subsequent intra-year declines stayed within “pullback” territory of 5% to 10%. Perhaps, economic softness may be a path toward easier monetary policy rather than recession risk? The week’s performance suggests that investors remain confident that any near-term weakness may be contained.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Argus:
CFRA:
Capital Group:
Goldman Sachs:
Northern Trust:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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