Your Monthly Market Newsletter, September 2024

August kicked off with a turbulent start as the July jobs report came in shorter than expected, causing many investors to believe that the labor market was cooling too quickly. The U.S. labor market added 114,000 jobs, coming in well below the 175,000 jobs that were expected. Despite the volatility at the beginning of the month, the market rebounded, with the Dow Jones, S&P 500, and NASDAQ all recovering their losses (and then some) just in time for Labor Day weekend.

At long last, the Federal Reserve (Fed) appears to be positioned to cut interest rates. In August, Fed Chair Jerome Powell signaled that the Fed will likely announce a rate cut at its September meeting as the job market continues to soften and the Personal Consumption Expenditures (PCE) index slows its pace, only rising 0.2% in July from June. The Fed has used both measures to gauge inflation as it approaches its 2% target rate.

Consumer confidence ticked up in August to 103.3 from 101.9 in July, though feelings were mixed this month. Consumers felt more positive about current business conditions, though the recent jobs report data made them feel less positive about the labor market. However, consumers appear to be less concerned with inflation as expectations for 12-month inflation were at their lowest point since December 2020.

September is National Life Insurance Awareness Month, a great reminder to review your current plans or explore options if you don’t have life insurance. Life insurance is intended to help your loved ones financially after you die. If you’re unsure if life insurance is right for you, or you do have coverage but have recently experienced life changes, and you are wondering if you need to update your coverage, contact our office. We’d be happy to help you explore your options as well as provide a review of your overall financial situation. Wishing you a happy fall!

Stocks

The final month of summer was also the most volatile month of the year so far for equity markets. In the first week of the month, each of the three major U.S. equity indices - the Dow Jones, S&P 500, and NASDAQ - fell more than 5%. The steep drop was driven by weaker-than-expected economic data that spooked investors. As the month continued, economic data improved and equities rebounded, climbing over 1% month-to-date to close out the summer. However, smaller companies struggled to bounce back by the end of August. Despite a strong rally in July, smaller companies ended the month negative, unable to regain all the ground lost in the sell-off earlier in August.

Sector Performance

Markets continued to broaden in the large-cap space, with performance spread across multiple sectors. The influence of lower interest rates on market sectors was evident, with Utilities and Real Estate performing well alongside traditional risk-off equity sectors such as Financials, Health Care, and Consumer Staples. Summer was not the only season that ended in August; earnings season wrapped up with the intensely watched Nvidia beating street expectations. However, its stock price fell slightly when some investors’ lofty expectations were not surpassed. Broad earnings were strong throughout the quarter, which helped to boost investor confidence through a volatile month.

Bonds

Bonds provided returns that were mainly in line with equities in August as rates fell due to moderating economic data and the Fed hinting at likely cuts to interest rates in September. The yield on the 2-year treasury fell 34 bps, and the rate on the 10-year declined 13 bps. Although the Fed did not meet to adjust the policy rate in August, at its annual Jackson Hole Symposium, Chairman Powell suggested that rate cuts have become a question of how many and how fast as inflation continues to decline.

Economic Update

August began with a weaker-than-expected Institute for Supply Management (ISM) Manufacturing report, a rising unemployment rate (4.3%), and fewer jobs added to the economy than expected. Investors’ initial fears of a recession were calmed when a deeper dive into the data suggested the unemployment uptick was from new workers joining or re-entering the workforce instead of people being laid off. More robust ISM services data and an upwardly revised Gross Domestic Product (GDP) figure of 3.0% furthered the positive sentiment. Inflation also continued to moderate, with the Consumer Price Index (CPI) falling to 2.9% year-over-year and the Personal Consumption Expenditures Price Index (PCE) rising to 2.5%. The Fed is monitoring both key measures as inflation slowly moves back to the Fed’s 2% target. 

Start-Up Is Saving Trees, One Leaf At a Time

Though our world has become increasingly digital, paper is still a hot commodity worldwide. In fact, demand for paper products is expected to double by 2050. Each year, an estimated 4-8 billion trees are cut down for paper or cardboard, and 1.4 billion of those trees eventually end up in landfills as waste. A Ukrainian start-up hopes to reduce that waste by reusing a type of waste already existing. The company Releaf Paper uses dead leaves to create paper used in products such as shopping bags, office supplies, and more.

An average city can produce 8,000 metric tons of dead leaves that must be collected before they create havoc, clogging gutters and sewers. These leaves are often composted, burned, or end up in landfills. Rather than have them go to waste, Releaf Paper has collected thousands of tons of leaves from across Europe to create paper products. Their facility in Paris then uses a low water, zero sulfur or chlorine production process that allows them to make paper with smaller water and carbon footprints. The company is already selling products to several others, such as Logitech and Samsung. The founders hope to expand their production to other continents.

To read more about how Releaf Paper is making an impact, check out this article.

THOUGHT FOR THE MONTH

^{Index Definitions}

^{Dow Jones Industrial Average:The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.}

^{Dow Jones U.S. Real Estate Total Return Index:The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.}

^{NASDAQ Composite:The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.} 

^{S&P 500 Bond Index:The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.}

^{S&P 500 Consumer Discretionary:The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.}

^{S&P 500 Consumer Staples:The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.}

^{S&P 500 Energy:The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.}

^{S&P 500 Financials:The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.}

^{S&P 500 Index:The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.}

^{S&P 500 Utilities:The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.}

^{S&P U.S. Aggregate Bond Index:The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.}

^{S&P U.S. Treasury Bond Index:The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.}

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^{A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.}

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