The market was crazy fickle this month with multiple rallies and declines packed within a mere four-week period. Blame it on news related to world economic growth slowing, the Fed’s next rate decision or the US / China trade talks. By month’s end, participants should be glad the market only posted a slight decline in what was an overall very turbulent period for stock prices.
Uncertainty wasn’t limited to the US. The UK elected a new prime minister on the promise to exit the European Union by October with or without a deal. Trade tensions and weakening economic data also contributed to the volatility. Overall, developed country returns outperformed emerging countries but both saw declines for the period.
The winner for the month was US fixed income markets. As investors sought a haven from the stock market rollercoaster, they drove bond prices higher and yields lower. The Barclay’s Aggregate index gained 2.6% for the month. The rally in long-term bonds resulted in the yield curve inverting causing speculation about the economic expansion ending soon.
In the US, large caps outperformed small cap stocks. Value struggled to compete with growth largely due to the collapse in the energy sector which composes a larger percentage of the small cap and value indices. Defensive sectors such as staples and utilities held up best. Overall, it was a challenging month for equities worldwide in August.
Notable Market and Economic Happenings:
- Despite the above backdrop, two-thirds of S&P 500 industry groups have rising 200 day moving averages with 80% above their respective industry moving averages. It suggests a positive long-term outlook.
- When you compare YTD 2019 with years having a similar trading pattern, it suggests a better than average return outcome for the remainder of the year with less downside volatility than a typical year. This stands in sharp contrast to the prevailing market expectation.
- The bond market is pricing in a 50% chance of two rate cuts between now and the end of the year.
Inspirational Thought for the Day:
“Everyone wants to live on top of the mountain, but all the happiness and growth occurs while you’re climbing it.” – Andy Rooney