Your Monthly Market Newsletter, August 2024

As August rolls into view, we see investors struggling to fan away the perspiration caused by nationwide record high temperatures and oppressive humidity. They're also sweating because of July’s turbulent market performance. Tech stocks – which had fueled market gains in the first half of the year – sputtered at month's end. On July 24th, the S&P 500 fell by 2.3%, its worst session since December 2022; on July 31st, the Nasdaq experienced its worst day since October 2022.  

Thankfully, the Summer Olympics kicked off in July, providing a welcome distraction as we cheered on our country's athletes. The often-unseen tragic story behind all the hoopla is that most Olympians struggle financially.

The Commission on the State of U.S. Olympics & Paralympics released a report in March that identified financial barriers for Olympic hopefuls. "Some of the most talented competitors under our flag go to sleep at night under the roof of a car or without sufficient food or adequate health insurance," the Commission wrote. In a survey of about 1,000 American athletes in the Olympic and Paralympic pipeline, 26.5% reported individual incomes under $15,000 a year. Many take on multiple jobs to pay for training, equipment, entry fees, and living expenses and accrue tens of thousands of dollars of debt in pursuit of their dreams.

August also signals the ramp-up to the new school year, with higher education expenses continuing to see double-digit cost increases. According to the Education Data Initiative, 42.8 million borrowers have student loan debt, with an average balance of $37,853. For many households, student loan debt is the most significant monthly expense (after their mortgage) – and it seems to take forever to pay off. Here are some options to help get debt under control:

• Refinance the student loans. This option may be suitable if the loan carries a high interest rate (7% or greater), has high monthly payments, or if you wish to combine multiple loans. Refinancing consolidates those loans into one new loan with a single payment.
• Check eligibility for an income-driven repayment ('IDR') plan. This strategy is best if most of your loans are federal and your loan balance is high relative to your income. The plan restructures your debt and reduces your monthly payments based on your income, family size, state, and the type of federal loan you have. To learn more about IDRs, visit this information page from StudentAid.gov.
• If eligible, seek student loan forgiveness. If you work full-time in the government or any public service job, you may qualify for Public Service Loan Forgiveness ('PSLF'). For more information about the PSLF program, visit this information page from StudentAid.gov.

As we continue to navigate this time of high inflation and prices, managing your budget is more important than ever. There are a few ins and outs when considering a payoff plan for large student loans (or any type of debt); please reach out so we can determine the best course for you. Contact our office today to schedule some time. We're here to help. Stay cool!

Stocks

The U.S. equity market underwent a rotation in the month of July, where the leaders of the first six months of the year became the laggards. The concentration of performance shifted away from the large tech-heavy NASDAQ and into other areas of the market like real estate and utilities. Additionally, smaller companies shined in July, with the small-cap Russell 2000 index posting double-digit returns. Continued optimism on the Federal Reserve cutting interest rates this year buoyed smaller companies, which are more reliant on interest rate-sensitive debt.

Sector Performance

Broad market rotation occurred not only at a company size level but also in sector orientation. The only two negative performing sectors in the month of July were Technology and Communication Services, which, even after their sell-off, are the best-performing sectors of the year. Conversely, the best-performing sector of the month, Real Estate, gained over 7%, which was enough to take it out of the red for the year. Weaker than expected earnings contributed to the selling pressure within the two tech-oriented sectors, as well as profit taking as valuations became pricey.

Bonds

Fixed income assets posted strong results as interest rates fell throughout the month on the back of dovish Federal Reserve commentary, suggesting interest rate cuts were closing in. The 10-year Treasury rate fell 37 bps and the 2-year rate fell 50 bps. The sharp fall in interest rates led to the U.S. Aggregate Bond Index outperforming the S&P 500. As interest rates fall, longer-duration assets tend to outperform, and that was on full display in July with the U.S. Long Government Bond Index gaining nearly 3% in the past month and moving out of the red on a yearly basis.

Economic Update

Moderation was the theme in economic data throughout the month of July. Inflation, as measured by the Consumer Price Index (CPI), fell to 3% on a year-over-year basis, while the Personal Consumption Price Index (PCE) moved to 2.5%. Investors also digested a series of Initial Jobless Claims that rose slightly, signaling more people filing weekly for unemployment. However, Gross Domestic Product (GDP) remained resilient and grew faster than expectations at an annualized rate of 2.8% in the second quarter of the year, doubling the growth rate seen in the first quarter.

Rescue Dog Saves Family From
Dangerous Carbon Monoxide Levels

The Griffin family may have rescued Luna, a two-year-old Husky, earlier this year, but Luna soon had her chance to return the favor. One day, Marion, Indiana, resident and Luna’s owner, Samantha Griffin, felt like she had a migraine and went to her bedroom to lie down. However, Luna sensed something was wrong and would not let Griffin rest. She encouraged Griffin to go outside, and the carbon monoxide detector went off as they left the home. Griffin quickly went back inside to round up her children and get them outside to safety. Then, she called her utility company, which called the fire department, and discovered that the water heater was leaking high levels of carbon monoxide into the home.

Luna’s quick thinking helped save the family even before the alarm sounded. Though the alarm worked, this situation is a good reminder that detectors can take some time to react to leaks, especially depending on where they’re located. Detectors should be placed as close as possible to natural gas appliances like stoves and water heaters. Carbon monoxide is odorless and tasteless, making it particularly harmful when it leaks.

Griffin is very thankful for Luna’s heroic effort. She had adopted Luna as an emotional support animal and to help her with PTSD. She couldn’t imagine Luna would wind up doing so much more. For more details on this incredible story, read here.

THOUGHT FOR THE MONTH

^{Index Definitions}

^{Dow Jones Industrial Average:The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.}

^{Dow Jones U.S. Real Estate Total Return Index:The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.}

^{NASDAQ Composite:The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.} 

^{S&P 500 Bond Index:The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.}

^{S&P 500 Consumer Discretionary:The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.}

^{S&P 500 Consumer Staples:The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.}

^{S&P 500 Energy:The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.}

^{S&P 500 Financials:The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.}

^{S&P 500 Index:The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.}

^{S&P 500 Utilities:The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.}

^{S&P U.S. Aggregate Bond Index:The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.}

^{S&P U.S. Treasury Bond Index:The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.}

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^{A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.}

^{Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.} 

^{Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.}

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