Investment Update August 20, 2024

Last Week on Wall Street

Economic data for the week included both producer and consumer price indexes coming in lower, showing continued deceleration toward more normal levels. Retail sales and consumer sentiment improved, while industrial production and housing starts declined, with the latter likely driven by weather-related events.

Equities gained ground globally, following a week of high volatility, with both the U.S. and foreign markets seeing similar gains. Bonds also fared well as yields fell in response to decelerating inflation. Commodities were mixed with metals up and energy down, despite higher Middle East tensions.

U.S. stocks reversed course from the prior week’s volatility. By sector, growth leadership resumed with technology and consumer discretionary leading the way. Laggards included communications, as well as energy and utilities, all of which were up only about a percent. Real estate was only slightly positive.

Stocks started the week strongly on Tuesday, then the narrative of a continued deceleration of inflation was kept intact by new inflation index reports. The Thursday jobless claims and retail sales data seemed to alleviate some concerns over the health of the consumer.

Foreign stocks performed roughly in line with U.S. stocks for the week, with rising hopes for rate cuts by the European banks. Japan outperformed Europe, in a recovery from volatility the prior week. In emerging markets, most countries saw positive returns, led by South Korea and Taiwan, which have been closely connected to U.S. technology sentiment.

Bonds also fared well last week, as yields ticked down along the longer part of the U.S. Treasury yield curve. These appeared to be in response to the improved inflation data, which raises the chances of a Federal Reserve rate cut in September. Both investment-grade and high yield bonds outperformed, as spreads also tightened again, although floating rate bank loans also earned positive returns. Foreign bonds fared positively, as the U.S. dollar declined about a half-percent on the week.

Commodities were mixed for the week, with gains of 2-3% in industrial and precious metals offset by declines in energy and agriculture. After rising on Monday morning for a bit, crude oil prices ended the week down a bit at $75.50/barrel.

Fact of the Week

Hampton Morris became the first U.S. man to win a medal in Olympic weightlifting since Mario Martinez and Guy Carlton in 1984. The 20-year-old trains in his garage and took home a bronze medal (source: Yahoo Sports).