Market Recap – August

Major Benchmark Returns in August 2024

August’s market sell-off may have been scary, but the recovery was spectacular. Though the sell-off was sparked by a swift decline in Japanese stocks, investors were also spooked by weak economic data, disappointing corporate earnings, and concerns that the Fed may be too late in its response. In the second half of the month, other data points still indicated a healthy economy and buy-the-dip mentality provided a support for markets.

July’s CPI and PCE reports largely met expectations, setting the stage for a widely anticipated interest rate cut in September. However, core services inflation was still hot (see Chart).

“The Time Has Come”

Fed Chairman Jerome Powell announced on Friday, August 23, that “the time has come” for a policy change. A September interest-rate cut would be the first since the Covid-19 pandemic. The market is now expecting up to 0.75% cut by the end of 2024.

What does a rate cut mean for investors? Borrowing costs will adjust accordingly. Interest rates on short-term revolving loans such as credit card, HELOC, margin loans, etc., will decrease. On the flip side of the coin, savers will earn less on their cash in high-yield savings instruments like certificates of deposits, money markets, and Treasury bills. We locked in some Treasury notes with 2025 and 2026 maturities when their yields reached 5% last year.

Planning Opportunity: Roth Conversion

Whenever there is volatility, there is opportunity. A dip in the market is usually a good time to put money to work if time is on your side. A Roth conversion — moving pre-tax IRA funds into a Roth IRA — allows your investments enjoy tax-free growth for good. Of course, there are other factors that determine whether this strategy makes sense for you. Talk to us if you would like to learn more.

We hope you had a wonderful Labor Day weekend and look forward to closing out the year on a strong note.  We’ll be back next month!