Hello all - we hope you had a nice August.
It was yet another month in the green for stocks. The Dow posted a gain of 4.0%, the S&P 500 added 2.0%, and the Nasdaq, which has a higher concentration of tech stocks, rose 3.0%.
It was yet another month in the green for stocks. The Dow posted a gain of 4.0%, the S&P 500 added 2.0%, and the Nasdaq, which has a higher concentration of tech stocks, rose 3.0%.
Here’s a look at how the markets moved this month:
Here’s a look at the performance of the various sectors in the market:
We saw a little more volatility at the beginning of the month, but that volatility subsided quickly.
The market continues to trade in the tight range we’ve seen the last several months.
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TARIFFS
It seems like a long time ago, but August opened with new tariff announcements from the Trump administration. Some countries saw higher tariff rates while others saw lower rates.
For the longest time, tariffs kept getting delayed and the market didn’t pay much attention. The realization that the tariffs are here and are now implemented helped the market sell off strongly on the news.
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NVIDIA
Earnings from Nvidia was a highly-anticipated event this month. We don’t often talk about individual stocks, but Nvidia, whose chips are used in AI supercomputers, is the largest weighted stock in the market and it sets the tone for the direction of the market.
The company released earnings and while they still showed strong growth, they weren’t growing as fast as before. Additionally, they anticipated slower growth ahead.
The hype around AI has been a big driver in the markets recently, sending tech stocks in particular to record highs. While the AI hype is still here, the excitement may be starting to cool down.
As goes Nvidia, so goes the market. The stock faded into the end of the month and the broader market tagged along, too.
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FED
Later in August, the market saw solid gains on news out of the Fed that rate cuts were likely in September.
The Fed held their annual “Economic Symposium” in Jackson Hole, where they don’t implement any new policies at that time, but discuss the conditions and their outlook. Fed chief Jay Powell cited the weakness in the jobs market as a reason for possibly lowering rates.
It’s the most ‘dovish’ Jay Powell has been in a long time and the market saw it as a green light to go higher.
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EMPLOYMENT
The worry about the employment picture cited by Jay Powell was due to the economy adding only 73,000 jobs last month. Additionally, the figures from the previous two months were revised sharply lower.
Adding to the volatility, President Trump weighed in citing manipulation by the bean counters and ordered the head of this division to be fired.
While the large and frequent revisions in these number do suggest something is wrong, declaring it manipulation and replacing the head of the department raises questions about quality of all economic data going forward. This will only lead to more volatility in the future.
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INFLATION
Inflation data out this month showed inflation may be getting warmer.
When we look at inflation on a month-to-month basis, prices continue to rise.
When excluding energy and food from the calculation (which economists call the “core” measurement), inflation rose steadily yet again.
Inflation at the business level showed a surprisingly high jump over the past month. This inflation level tends to lead the CPI, and investors are worried that the tariff costs are starting to work their way into the system.
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OTHER ECONOMIC DATA
Other economic data released this month showed an economy that continues to grow, though slightly.
With a more granular look at the economy, both the manufacturing and service sides of our economy saw modest declines.
Retail sales moved higher:
Durable goods (these are items with a longer life, like a phone or refrigerator) also saw a slight increase.
Consumer confidence moved slightly lower.
However, small business owners were slightly more optimistic.
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Where does the market go from here?
Stocks seem slightly overvalued here in the short run, but the trend has been steadily higher. However, we are entering a historically volatile time of year, so caution is warranted.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
