Presented by The PensionmarkMeridien Team, August 20, 2024
After the recent two-week surge in market volatility and fresh inflation data reinforcing a change in tune, now is the perfect time to keep you updated on the latest developments.
Overall, for the week ending 08/16//24, the S&P 500 rose by 3.93%1, the NASDAQ 100 decreased by 5.38%2, and the Dow Jones Industrial Average gained 2.94%3.
INFLATION PICTURE
Consumer Price Index (CPI): Year-Over-Year Decline:
Consumer inflation declined on a yearly basis in July, with the annual inflation rate slowing to 2.9% — the lowest since March 20213. On a monthly basis, July CPI data increased at a 0.2% rate, in line with expectations. Great fresh news for the interest rate cut case!
Shelter inflation continues to be persistent and increased at a .4% clip4 in July, which was responsible for 90% of the all-items inflation increase. Meanwhile, food pricing climbed at a 0.2% rate month over month for July, and energy pricing was flat.
July Core CPI(which removes more volatile food and energy from the metric) also cooled, coming in at expectations with a yearly 3.2% gain. On a monthly unrounded basis, we saw a .02% increase in line with expectations. Stock market bulls loved this aspect of things, especially pertaining to future rate cuts!
Producer Price Index (PPI): Cooling:
Ahead of the encouraging CPI print on Wednesday, Tuesday gave us the July Producer Price Index, which ran cooler than estimates. Data showed wholesale pricing rose 0.1% in July5, lower than the 0.2% Dow Jones estimate.
Perhaps even more encouraging for market bulls was the yearly wholesale inflation decrease, which showed a drop to 2.2% from June’s annual reading level of 2.7%. The lower data point ahead of CPI excited market bulls, heading into the more important CPI number the next day.
What fantastic inflation data for the markets, especially after experiencing a sharp spat in volatility in the previous two weeks. The broad stock market indexes are resilient assets and are even more resilient with encouraging labor market data like this.
TREASURY YIELDS FALL
As major stock indexes rose last week on lower inflation data, Treasury yields fell. Ten-year note yields shed about 4.8 basis points last week, finishing the week near 3.893%6.
Bonds were bought by some folks, in anticipation of lower yields to come. Remember, bond yields and bond prices move in opposite directions.
CONSUMER SENTIMENT BOUNCES
After a five-month dry spell in consumer sentiment, August data gave us signs of a bouncing consumer. Data showed consumers feeling more resilient in August, with the University of Michigan Consumer Sentiment Index reading at 67.87, up from 66.4 in June. This was the highest reading since June and the first uptick in five months.
Considering the data from CPI last week, shelter costs continue to plague consumers, with pricing being notably stubborn. Ideally, shelter prices will lessen in the months to come, which could further fuel a rebound in consumer sentiment. We will continue to monitor sentiment and the narratives that come along with it!
RETAIL SALES RECOVER
Along with the bounce in consumer sentiment, retail sales data also gave bulls more reasons to buy last week. Data for July showed a 1.0% jump8 amid expectations for a rise of .03%. So, much better than expected!
Strength was seen in automobile/parts dealers, appliance stores, and food/beverage outlets. Miscellaneous retailers, which saw much strength just a few months ago, saw plunging sales receipts.
GOLD SHINES
Investors that have an allocation to the precious yellow metal were rewarded last week as spot gold prices pushed through $2,500 per ounce for the first time in history, closing the week near $2,5089 per troy ounce.
Given expectations for an easing Fed and a recent softening dollar, it makes sense that gold pushed higher. Even more impressive, however, is the fact that gold has performed so well throughout the interest rate hiking cycle.
Global central bank buying has certainly played a role in gold remaining firmly priced for an extended period.
LET’S ONCE AGAIN REITERATE:
- It is an election year. Election years historically portend volatility, and we just saw some.
- “Higher for longer rates” has been the narrative for an extended period. Themes change.
- CPI data is showing continuing evidence of easing. Rate cuts are more likely.
- Did I mention it is an election year?
Aside from it being an election year and the memories of 2008, the volatility spat that we just saw was extremely short-lived. Will it return? Well, last week was yet another indication that those who react to short-term market gyrations featuring volatility get left behind.
For now, the digestion of the most recent inflation data was extremely encouraging, and market participants were pleased to see a CPI and PPI print that further solidified the case for rate cuts to come in the near future.
WEEK AHEAD
This week is more of a quiet one news-wise. However, we do get Federal Reserve meeting minutes from the central bank’s last meeting. In addition, it is the yearly Jackson Hole Symposium, which is often heavily monitored for clues in interest rate policy.
Looking at the CME FedWatch Tool for the upcoming September meeting (about a month away), a rate cut is widely expected. It is just a matter of it being 25 or 50 basis points. But these things can change!
As always, if there is anything on your mind regarding stocks, interest rates, dividends, small caps, or anything else, please feel free to reach out to me.
We can connect to discuss your thoughts.
The PensionmarkMeridien Team may be reached at 866-871-9963 or meridienteam@pensionmark.com
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This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
Citations:
1. Trading View, August 17, 2024
2. Trading View, August 17, 2024
3. Trading View, August 17, 2024
4. CNBC, August 14, 2024
5. CNBC, August 13, 2024
6. Trading View, August 18, 2024
7. Yahoo Finance, August 16, 2024
8. CNBC, August 15, 2024
9. Trading View, August 18, 2024
Advisory services offered by Pensionmark Financial Group. Securities offered by Pensionmark Securities, LLC, member FINRA/SIPC. Pensionmark Financial Group, LLC is affiliated through common ownership with Pensionmark Securities, LLC.