As I sat at my desk this Friday afternoon, sipping my third cup of coffee (don’t judge, it’s been that kind of week), I couldn’t help but marvel at the market’s resilience. Despite our ups and downs, the S&P 500 managed to close 1.5% higher, the Nasdaq Composite jumped 1.4%, and the Russell 2000 outperformed with an impressive 3.6% gain.
It reminds me of a conversation I had with a trader last week. He was worried about market volatility, and I told him, “The stock market is like a man walking his dog. The man moves steadily forward in a general direction, but the dog zigzags back and forth. Don’t focus too much on the dog’s path—keep your eye on where the man is heading.” This week was a perfect example of that principle in action.
The week’s highlight was undoubtedly Fed Chair Powell’s speech at the Jackson Hole Economic Symposium. Now, I’ve listened to many Fed speeches during my time, and the Fed doesn’t seem to like to “surpise” the markets. It is interesting how often equities does go up during the actual speaking (I went long and paid off). Powell’s acknowledgment that “the time has come for policy to adjust” was like music to investors’ ears. It was as if the entire market leaned in, hanging on his every word, yet they have been slowing given this information for months.
But let’s not forget the FOMC Minutes from the July 30-31 meeting. When the Fed described a rate cut as “plausible,” I could almost hear the champagne corks popping in trading floors across the country. It’s funny how a single word can have such a profound impact on market sentiment.
Last week, U.S. Treasury yields rose significantly, with the 10-year yield reaching 3.84%, up 40 basis points over the past month. The 2-year yield increased to 4.02%, a 50 basis point jump. Municipal bonds also saw yield increases, with the 10-year muni yield rising 14 basis points to 2.66%.
Several fixed-income sectors experienced negative returns, including Treasuries and investment-grade corporates. However, high-yield corporates and some spread sectors outperformed. The municipal bond market saw $15.5 billion in new issues and $674 million in fund inflows.
US Market Highlights
- The Fed minutes signaled a likely rate cut in September, with the market now pricing in over four rate cuts this year. It’s like watching a high-stakes poker game, with the Fed holding all the cards. I’ve been in this game long enough to know that when the Fed starts hinting at rate cuts, it’s time to pay close attention.
- The payroll growth overestimation of 818,000 jobs was a real eye-opener. It’s the largest downward revision since 2009, and it hit the market like a ton of bricks. I’ve always said that in the world of finance, surprises are rarely good ones. This news served as a stark reminder that sometimes, the numbers we rely on aren’t as solid as we’d like to believe.
- U.S. economic growth cooled slightly in August, with the S&P Composite PMI dipping to 54.1. Now, don’t get me wrong – this is still a strong number. It’s like watching a star athlete have a slightly off day. They’re still outperforming most of the field, just not breaking any personal records.
- The housing market gave us a glimmer of hope with home sales ticking up 1.3% in July, ending a 4-month decline. But let’s not break out the party hats just yet. With prices still at record highs, the housing market remains about as accessible as a private island. I’ve been telling my clients for months now – if you’re looking to buy, patience might be your best friend.
- We saw some interesting moves in the corporate world this week. GM cut over 1,000 software jobs globally, which had me raising an eyebrow. It’s a clear sign of the shifting landscape in the auto industry. Meanwhile, Ford canceled plans for an electric three-row SUV and delayed its new EV plant. It’s like watching a game of high-stakes chess, with these auto giants constantly adjusting their strategies.
Global Highlights
- Tesla pulled off quite a coup by securing lower EU tariffs on China-made EVs. This move gives them a significant advantage over competitors, and I wouldn’t be surprised to see it shake up the European EV market. It’s a reminder of why I always tell my clients to keep an eye on global policy changes – they can have a huge impact on individual stocks.
- Walmart’s decision to dump its $3.74 billion stake in JD.com caught my attention. It’s a bold move, but one that makes sense if you look at the bigger picture. By focusing on its own China operations, Walmart is betting on its ability to navigate the complex Chinese market independently. It’s a high-risk, high-reward strategy that I’ll be watching closely.
- The UK’s economic growth acceleration in August was a pleasant surprise. With the S&P Composite PMI rising to 53.4, driven by strong jobs growth, it’s like watching a comeback story unfold in real-time. I’ve always said that in investing, it’s important to look for bright spots even in challenging times, and the UK might just be one to watch.
- Japan slipping back into a trade deficit was less encouraging news. With a $4.28 billion shortfall in July, it’s clear that rising import costs are outpacing exports. The stronger yen is adding another layer of complexity to Japan’s economic recovery. It’s a reminder of the delicate balance in global trade and how quickly things can shift.
Commodities & Crypto Corner
The commodities market this week was like a three-ring circus, with something interesting happening in every corner.
Oil prices took quite a tumble, falling 4% despite a late-week surge. It’s like watching a roller coaster that mostly goes down but throws in a few upward twists for good measure. The rumors of a ceasefire in the Middle East certainly added to the volatility. As always, geopolitical events continue to play a significant role in oil prices.
Gold, our steady Eddie of the investment world, consolidated its positions after recent record highs. Falling back below $2,500 per ounce, it’s still showing strength in the face of economic uncertainty. I’ve always viewed gold as a good hedge against inflation and market volatility, and its performance this week reinforces that belief.
In the world of crypto, Bitcoin put on quite a show, rallying more than 4.9% to $61,000. It’s like watching a phoenix rise from the ashes, reminding us of its resilience. The influx of $250 million into Bitcoin Spot ETFs in the US certainly helped fuel this surge. It’s a stark reminder of how institutional interest can drive crypto prices.
Ethereum, on the other hand, seemed to be playing catch-up, with a modest increase of 1.73%. It’s currently hovering around $2,650. The disparity between Bitcoin and Ethereum’s performance this week is a good reminder of why diversification is key, even within the crypto space.
Calendar – The Week Ahead
Looking ahead to next week, I feel like a kid on Christmas Eve. The anticipation is palpable, especially with Nvidia’s earnings report on the horizon. This report has the potential to move markets, and I wouldn’t be surprised if it sets the tone for tech stocks in the coming weeks.
Other key reports I’ll be watching closely include Salesforce, CrowdStrike, Best Buy, and Dollar General. Each of these reports will provide valuable insights into different sectors of the economy, from enterprise software to consumer spending.
And let’s not forget the Bureau of Economic Analysis’ PCE report – the last one before the Fed’s next rate decision on September 18. This report will be crucial in shaping expectations for the Fed’s next move. It’s like the final dress rehearsal before the big show, and you can bet I’ll be analyzing every detail.
As we wrap up this week and look forward to the next, I’m reminded of a quote from the great Warren Buffett: “The stock market is a device for transferring money from the impatient to the patient.” In these times of market volatility and economic uncertainty, patience and a long-term perspective are more important than ever.
Remember, in investing, knowledge is power. But as any seasoned investor knows, it’s not just about having information – it’s about knowing how to use it. Stay curious, stay informed, and most importantly, stay level-headed.
