US Markets
Stocks edged higher during a volatile month of trading as investors monitored economic reports about the Fed’s next move with short-term interest rates.
The Dow Jones Industrial Average led in July, picking up 4.41%. The Standard & Poor’s 500 Index added 1.13% while the Nasdaq Composite struggled, slipping 0.75%.1
Fed One Step Closer?
Stocks opened the month strong, supported by a Consumer Price Index report that showed inflation dipped in June.
The Personal Consumption Index, an inflation measure closely followed by the Fed, offered additional evidence that inflation was slowing.
Some concluded this news may bring the Fed one step closer to adjusting short-term rates.2
Tech Under Pressure
The rally came under pressure mid-month, however, as investors turned away from technology issues to focus on small-cap names and the Dow Industrials.
Investors anticipated that small caps and blue chips would be among the first stock market groups to benefit if the Fed cut short-term rates.
The Russell 2000, a barometer for small-cap stocks, gained over 10% in July.3,4
Fed Chair Says ‘Rate Cut’ on the Table
As the month came to a close, stocks regained their momentum in the days leading up to July’s Fed meeting.
When Fed Chair Jerome Powell indicated a September rate cut was “on the table,” stocks saw a broad-based rally on the last day of trading.5
What Investors May Be Talking About in August
In the month ahead, expect attention to continue shifting to the election on November 5.
While much of the attention tends to focus on the presidency, it’s important to remember that 34 Senate races, all 435 House seats, and a host of other state and local initiatives will be on the ballot.
Here are three takeaways to consider:
- Expect the unexpected — Speeches, debates, and other comments from presidential candidates can lead to new information being released. Speculators can overreact to how a proposed policy idea may affect the economy and the financial markets.
- Anticipate market volatility — Historically, September and October have been the most volatile months for stock prices. Mix in some election uncertainty this year, and price swings may again mark September and October.7
- Remember your portfolio — There’s an old saying that goes, “You might care more about the election than your portfolio.” Remember that your goals, time horizon, and risk tolerance should guide investment decisions, not election cycles.
World Markets
The MSCI-EAFE Index gained 2.89% in July as markets rallied globally.8
European stocks performed well, with the UK (+1.40%), Spain (+1.11%), France (+0.45%) and Germany (+1.50%) notching gains.9
Pacific Rim markets were mixed. India’s Sensex index rose 3.43% while Japan’s Nikkei lost 1.22%, and China’s Hang Seng index fell 2.11%.10
The Fed
The Federal Reserve left interest rates unchanged at the 5.25-5.5% target range following its two-day meeting that ended on July 31.20
In its policy statement, the Federal Open Market Committee (FOMC) downgraded its level of concern around inflation, leading some to be more hopeful for a rate move at the September meeting.
At the press conference following the announcement, Fed Chair Powell added, “A reduction in the policy rate could be on the table as soon as the next meeting in September. We’re getting closer to the point at which it’ll be appropriate to reduce our policy rate, but we’re not quite at that point.”20
Our blog posts are intended for information purposes only and should not be interpreted as financial advice.
You should always engage the services of a fully qualified financial planner before entering any financial contract.
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Fortitude Financial Planning Ltd will not be held responsible for any actions taken as a result of reading these blog posts.
1. WSJ.com, July 31, 2024
2. CNBC.com, July 11, 2024
3. CNBC.com, July 17, 2024
4. WSJ.com, July 31, 2024
5. CNBC.com, July 31, 2024
6. SectorSPDRs.com, July 31, 2024
7. Nasdaq.com, October 3, 2023
8. MSCI, July 31, 2024
9. MSCI, July 31, 2024
10. MSCI, July 31, 2024
11. WSJ.com, July 25, 2024
12. WSJ.com, July 5, 2024
13. APnews.com, July 16, 2024
14. KPMG.com, July 17, 2024
15. KPMG.com, July 17, 2024
16. CNBC.com, July 23, 2024
17. BankingJournal.ABA.com, July 24, 2024
18 APnews.com, July 11, 2024
19. BankingJournal.ABA.com, July 25, 2024
20. WSJ.com, July 31, 2024
21. NPS.gov, 2024
22.Yahoo.com, 2024
23. NPS.gov, 2024
24. NPS.gov, 2024
25. NPS.gov, 2024
26. NPS.gov, 2024
27. EIA.gov, 2024
28. EIA.gov, 2024
29. EIA.gov. 2024
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