Volatility in Recent Weeks – with Shannon Avery, AAMS®
August 12, 2024
In recent weeks markets have been unusually active for summer. The final week of July saw numerous earnings reports, three central bank meetings, and significant labor-market data. Corporate earnings beat estimates overall, but stocks fell since the start of Q2 earnings season, as growth concerns reversed the rotation into small-caps and cyclicals, and AI stocks had their biggest pullback of the year. Although holding rates steady, the Fed acknowledged labor market risks, and July’s rise in unemployment likely encourages a rate cut in September, with more cuts possible later.
Here are five important points to consider in context as we digest recent market activity:
Volatility: Market volatility is increasing, as it normally does during the Fall and during election years, but the bull market is likely to continue. Historically, strong first-half gains lead to positive second-half returns, though with deeper pullbacks.
Federal Reserve Policy: After a long period of tightening, the Fed signals an upcoming easing cycle, with potential rate cuts starting in September due to labor market risks. The Fed’s focus is now shifting from inflation to employment
Job Market: July saw a weaker-than-expected jobs report with 114,000 jobs added and unemployment rising to 4.3%. Despite the slowdown, the labor market remains healthy with a low unemployment rate and strong job openings.
Market Leaders: Tech stocks, especially in AI, are experiencing corrections despite strong growth. Broader market leadership is emerging with gains in cyclicals and defensives, emphasizing the importance of diversification.
Yield Curve: The yield curve, inverted for over two years, may normalize as the Fed hints at easing. Bond prices are rallying, and yields are dropping, suggesting a favorable time for investors to shift from cash to bonds.
Despite potential volatility, we don’t expect short-term pullbacks to alter the positive market outlook. Inflation is nearing the target, allowing the Fed to ease up. The economy is growing at a slower pace, productivity is rising, and corporate earnings are increasing. We believe the bull market is not over, and short-term pullbacks, though uncomfortable, present opportunities to rebalance, diversify, and invest anew as the overall outlook remains positive.
This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. This information does not address individual situations and should not be construed or viewed as any type of individual or group recommendation. Be sure to first consult with a qualified financial adviser, tax professional, and/or legal counsel before implementing any securities, investments, or investment strategies discussed.
