September 15, 2024
Volume11, Issue 37
Weekly Recap
Domestic stocks managed to post solid gains last week and largely recovered from the previous week’s steep losses, which saw the S&P 500 suffer its worst weekly decline since March 2023. Growth stocks outpaced value shares by a wide margin, aided by strong performances from technology stocks. NVIDIA was a particularly strong contributor after the chip giant offered a positive outlook on artificial intelligence at an investment conference. Last week’s relatively light economic calendar was dominated by the Labor Department’s inflation reports. On Wednesday, stocks initially headed sharply lower following news that core (ex-food and energy) consumer inflation rose to 0.3 percent in August, a tick higher than consensus expectations. Meanwhile, headline inflation showed an annual increase of 2.5 percent, well below July’s increase of 2.9 percent and its lowest level since early 2021.
Data also suggested some minor glimmers of hope for the troubled housing sector. The Mortgage Bankers Association reported on Wednesday that the average rate for a 30-year, fixed-rate mortgage fell to 6.29 percent, the lowest level since February 2023 and well below the 7.21 percent year-ago level. The association also reported that its index of home loan applications – a leading signal of home purchases – continued to climb off its August lows.
Last week’s speculation remained focused on how much – not if – the Federal Reserve would cut interest rates at its upcoming policy meeting on September 17–18. The upside core consumer inflation surprise on Wednesday appeared to support the view that the Fed would cut rates by only 25 basis points (0.25 percent) instead of the 50 basis points some had come to expect following the relatively weak August payrolls report. However, by the end of the week, the futures market was indicating nearly even odds that the Fed would deliver a 50-basis-point cut. U.S. Treasury yields ticked lower across the yield curve last week but rallied more at the front end. The yield on the benchmark 10-year U.S. Treasury note traded at year-to-date lows.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
Federal Reserve Chair Jerome Powell faces a difficult decision as the central bank prepares to cut interest rates next week: Start small or begin big?
The Consumer Price Index (CPI), a measure of inflation, rose 0.2 percent month-over-month and 2.5 percent annually in August, the Bureau of Labor Statistics reported on Wednesday, marking the lowest point of annual inflation since February 2021. Core inflation – CPI stripped of the more volatile food and energy prices – rose 0.3 percent month-over-month in August and increased 3.2 percent year-over-year – the same annual rate reported last month. The figures likely cemented Federal Reserve officials’ decision to cut interest rates by a quarter of a percentage point next week. Producer inflation was relatively tame in August, keeping alive expectations that the Federal Reserve will cut interest rates beginning next Wednesday. Wholesale prices have been more volatile than consumer prices in 2024 but remain on track for the Fed’s goals. The producer price index increased by 0.2 percent in August, in line with the consensus estimate, and up from 0.1 percent in July, according to data from the Bureau of Labor Statistics on Thursday. The year-over-year increase narrowed to 1.7 percent from 2.2 percent a month earlier.
Household incomes rose last year for the first time since the Covid-19 pandemic began, reflecting the effects of easing inflation and a strong job market. The new data from the U.S. Census Bureau on Tuesday signaled an improvement in 2023 after inflation that spiked to a 40-year-high the prior year swallowed up household income gains.
In the week ending September 7, the advance figure for seasonally adjusted initial jobless claims was 230,000, an increase of 2,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 227,000 to 228,000. The 4-week moving average was 230,750, an increase of 500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 230,000 to 230,250.
Here’s the dilemma: wo years ago, the inversion of the yield curve – shorter-dated U.S. Treasurys yielding more than longer-dated paper – was taken by traders as a surefire sign of recession. Now, Wall Street worriers have a new concern: The yield curve is back to normal, a surefire sign of recession. Josh Brown talks retirement investing.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
- Mean Reversion, or Extreme Aversion? (Drew Dickson)
- Deep Value (GMO)
- Your Client Is Forced to Retire Early. What Should They Do? (Roger Wohlner)
This is the best thing I’ve read recently. The creepiest. The funniest. The most inspiring. The most surprising(but not altogether surprising – IFKYK). 100 people. When bureaucracy works. The great Lego spill. Friday Night Lights. How pour-over coffee got good. Loophole. Moleskin. The ultra-selfish gene. Dressing red and blue. RIP, James Earl Jones. RIP, PopPop
A new study from Charles Schwab found that, on average, Americans consider themselves wealthy at $2.5 million, up from $2.2 million two years ago. Americans reported needing an average net worth of $778,000 to feel “financially comfortable,” down from $1 million last year.
Industry without art is brutality.”
~ Ananda Coomaraswamy “
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performanceis not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets. Madison Avenue Securities, LLC | 13500 Evening Creek Drive N, Suite 555 | San Diego, CA 92128 US
