By: Matt Garrott
August was the seventh month this year with positive returns for the S&P 500 (April being the outlier). Up 2.4% on the month, the S&P 500 is up 19.5% on the year, including dividends.
Market headlines continue to be dominated by the AI story as Nvidia is up over 100% on the year. Other “Magnificent 7” names have not fared as well. Apple (up 19.4%), Alphabet (up 16%), and Microsoft (up 11.5%) all trail the index. Perhaps flying under the radar are Utilities and Financials stocks as both sectors are up 22%. The latest member of the four comma club, Berkshire Hathaway, lives in the Financials sector. The other trillion-dollar market cap names are Apple, Microsoft, Nvidia, Alphabet, Amazon, and Meta.
Equity returns have been good, but some question how long it can last. The Sahm Rule (triggered by a rapid rise in unemployment) is pointing to recession. The 2/10 Year Treasury spread is un-inverting. Dis-inverting? Flattening? Whatever it’s called, it’s causing rumbling among economists. Inversion of the 2/10 has often preceded recession. The community has mixed feelings on assigning significance to normalization of the metric. The Federal Reserve is poised to shift its focus from inflation to the other half of its dual mandate, employment. Barring surprise data hiccups, this likely puts a rate cut on the table for the Fed’s September meeting.
What does that mean for investors? As usual, we urge them to diligently follow their financial plan. With so much data to pick through, there is always an indicator of looming recession or market catastrophe just around the corner. Most of this is noise. An analyst for a respected Wall Street firm was on TV recently talking about a technical indicator his team put together. It looked at market movements factoring in seasonality, the Presidential election cycle, and years ending in ‘4’. The news anchor asked what it’s saying about the market right now. “Well it doesn’t actually predict the direction of the market…” But it did get his firm’s name on TV for five minutes. It makes more sense for investors to focus on issues they can control than play the prediction game.
There is one last headline I’d like to share – Fairway in the headlines! You may have seen posts on social media of our team fielding financial questions from reporters. We now have a section on our website that showcases articles we’ve been featured in. Just click on the Insights tab, then In the News. We’ve also got a section with videos. This is where you can see Chris Martin interview two experts from Schwab on cyber-security, Brian Tullio talk about charitable giving, and we also have a series on the 9 Big Mistakes we see investors make.
