By: Michael Sellers
Partner, Portfolio Manager
Equities started off the month of August stronger, buoyed by optimism around US-Iran negotiations and a possible reopening of the Strait of Hormuz, robust corporate earnings from the ongoing Q2 reporting period, and falling energy prices.
Both the S&P 500 and Dow hit record highs this week, while the Nasdaq rebounded from a choppy month of July, climbing 4% as of Thursday’s close.
Economic Data Update
From a macro perspective, data continues to be resilient. The Institute of Supply Management Services Purchasing Managers’ Index (ISM Services PMI) reported a very healthy read of 54.1% in July, firmly in expansion mode. The Atlanta Fed’s GDPNow tracker is projecting Q3 GDP at a robust 5.8%.The labor market continues to be in “no hire, no fire” mode. Jobs data from Challenger found that companies cut roughly 33,000 jobs in July, the lowest number since 2024.
Today’s July nonfarm employment report from the Bureau of Labor Statistics showed the economy lost 23,000 jobs in July, below consensus estimates for a gain of 83,000. The unemployment rate fell to 4.1% from 4.2% in June.
Source: NBC News
Despite record highs in several major equity indices this week, volatility did creep back into the markets as the week progressed.
Yields moved higher mid-week as investors continued contemplating the idea of a more hawkish Federal Reserve and ongoing geopolitical uncertainty. Before today’s open, the 10-year Treasury was yielding 4.6%, while the 30-year Treasury was still firmly above the 5% threshold at 5.17%.
What Does This Mean For Investors?
From our perspective, investors will have to continue balancing a robust earnings backdrop, resilient economic data, and the possibility of higher-for-longer rates as uncertainty in the geopolitical landscape persists.This push-pull dynamic will likely extend through the end of summer and into the fall, creating both consternation and opportunity within the investment landscape over the coming weeks and months.
We encourage our clients, as with all investors, to stay disciplined and prudent during these inevitable periods of choppiness.
As the great investor Charlie Munger once said, “The big money is not in the buying or selling but in the waiting.”
