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Stocks Mixed
The Dow finished a quiet week of trading with a roughly 1% gain overall and eclipsed a record high set in mid-July. The S&P 500 finished fractionally higher—ending up less than a percentage point below its mid-July record—while the NASDAQ fell around 1%.
The U.S. Federal Reserve’s preferred inflation gauge on Friday showed a slow-but-steady easing of price pressures ahead of a September 17–18 Fed meeting that’s expected to produce the first rate cut in more than four years. Excluding energy and food prices, the Personal Consumption Expenditures Index rose at an annual rate of 2.6% in July, slightly below economists’ consensus forecast of 2.7%.
The U.S. economy expanded at a faster rate in this year’s second quarter than originally estimated. The government on Thursday reported that GDP grew at a 3.0% annual rate, up from an initial estimate of 2.8% made in late July. The revision was driven by an increase in personal spending.
Inflation across the 20 countries that use the euro currency fell to the lowest level in about three years, with the eurozone’s inflation rate recording an annual rate of 2.2% in August compared with 2.6% in July. Friday’s inflation data came two months after the European Central Bank cut its key interest rate for the first time since 2019; the bank’s next policy meeting is scheduled for September 12.
An indicator that tracks U.S. consumer sentiment rose for the first time in five months. Friday’s 67.9 reading from the University of Michigan’s Consumer Sentiment Index was up slightly from a preliminary August estimate of 67.8. Consumers’ expectations of inflation over the next year remained at their lowest level since December 2020.
A monthly employment report scheduled to be released on Friday will show how August’s jobs growth compared with July’s gain of 114,000 jobs. That result marked the second consecutive month of declining jobs growth, and July’s unemployment rate of 4.3% was the highest in nearly three years.
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Despite recent market swings, the S&P 500, Nasdaq, and Dow have gained 19.5%, 18.6%, and 11.7% with dividends this year, respectively. The S&P 500 has experienced only two periods of sustained pullbacks this year, with the largest decline measuring 8%, below the historical average. Bonds have struggled much of this year as rates have remained high, but the anticipation of Fed rate cuts has helped to boost returns more recently. So, while market volatility is never pleasant, it is important not to overreact to short-term events.
The stabilization in the stock market has shifted investor focus back to fundamental factors, particularly corporate earnings. This is because the stock market tends to mirror the trajectory of corporate profits over time, which in turn rises alongside the economy. Current earnings projections are positive with an expected growth rate of 10% in 2024 and nearly 14% over the next twelve months.
Similarly, bonds have performed better, with the Bloomberg U.S. Aggregate Index gaining 3.1% year-to-date and 6.7% since its bottom in April when the 10-year Treasury yield peaked around 4.7%. The high yield bond index has risen 6.3%, the corporate bond index 3.5%, and Treasurys 2.6%, fueled by the current Goldilocks period of improving inflation and steady economic growth. Bond prices also jumped at the beginning of August as they helped to balance stock market swings. These facts emphasize the importance of maintaining portfolio diversification, especially during periods of uncertainty.
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We Just Want to Have Fun! | |
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When you live a busy and sometimes stressful life, play can be important for your health. Adam Piore of Newsweek reported, “A weighty and growing body of evidence – spanning evolutionary biology, neuroscience and developmental psychology – has in recent years confirmed the centrality of play to human life. Not only is it a crucial part of childhood development and learning but it is also a means for young and old alike to connect with others and a potent way of supercharging creativity and engagement.”
The idea dovetails with a cultural trend known as “kidulting.” The Economist reported on the rise of kidulting, “…where adults engage in lighthearted activities traditionally designed for children…a giant ball pit for adults in three British cities, welcomes 25,000 visitors each month. Even museums and immersive exhibitions typically aimed at actual children now host adult-only evenings…Enthusiasts say that such spaces heighten creativity, human connection and joy, triggering the pleasure-seeking chemical [dopamine].”
New museums have popped up to help adults unleash their inner child. For example, the Museum of Ice Cream offers a fun-dae out for adults (children are welcome, too). They can frolic in pools of artificial ice cream sprinkles, engage with themed playscapes, and eat ice cream.
The WNDR Museum offers a completely different kind of fun. It engages visitors through interactive experiences with installations like The Wisdom Project that asks visitors to answer the question, “What do you know for sure?” and requests that they consider what information is important enough to put out into the world. Museum visitors also can use their imagination to create AI-generated artwork or visit the Quantum Mirror, “an infinity room with over 150 mirrors that touches on our interaction with technology. Our obsession with screens, the way that our self-perception has changed as social media has become more popular in our society.”
The National Institute for Play cautions that, while play is important for adults, what one person embraces as play may be an annoyance to another. Instead of interactive museums, your jam may be a fantasy football league, a book club or a hike in the woods. What do you do just for the fun of it?
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AJ Advisors
www.ajadvice.com
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Phone: (615) 709-8709
Fax: (615) 505-3306
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John Stauffer, CFP®
Partner
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Andrew Quinn, CFP®
Partner
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