Monthly Client Update - August 2023

Monthly Client Update – August 2023

July’s Market Summary

  • The S&P 500 Index rose by 3.3% in July but didn’t do as well as the Russell 2000 Index, which went up by 6.1%. All eleven sectors within the S&P 500 saw a rise, especially energy, communication services, and financial sectors.
  • Corporate bonds with a high credit rating saw a 0.1% return in July, less than the 1.1% return from riskier corporate bonds.
  • The MSCI EAFE Index, which consists of stocks from developed countries, increased by 2.7%.
  • The MSCI Emerging Market Index fared much better with a 6.0% return.

 The S&P 500 Close to Reaching its Record High 

The S&P 500 continued its winning streak for the fifth month in a row since March, with a return of 20.5% since the start of the year. It has now made up for most of the losses from 2022 and is less than 5% away from its highest value ever, reached in January 2022. Similarly, the Dow Jones Industrial Average, based on 30 big U.S. companies, had a 13-day winning streak in July – the longest since 1987. The Dow Jones is less than 5% from its record high in January 2022.

What is the reason for these stock market gains?… positive expectations. The U.S. economy has done better than expected, showing solid job growth, consumer spending, and corporate earnings, even with higher interest rates. As inflation shows signs of slowing down, this is causing more optimism, with investors hoping the Federal Reserve can manage a smooth transition or even prevent a recession. However, some are worried that the Fed may need to raise interest rates due to recent rises in the cost of homes and commodities.

Fuel Costs Rising, Causing Worries About Inflation 

The cost of gasoline is going up again, causing worry for consumers and those in charge of central banks. According to AAA, the average price for a gallon of regular gasoline was at a three-month high of $3.75 on July 31st. The recent rise in oil prices is causing this increase, along with factors like OPEC and Russia reducing supply, issues with production due to extreme heat, and overall positive expectations for the world economy and oil demand. While the current prices are still lower than the $4.22 per gallon from a year ago, the rise in fuel costs might slow down the Fed’s efforts to reduce inflation and lead to higher interest rates. As the situation develops, the market will closely watch the energy and commodity markets over the next few months.

Monthly Market Update Charts

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