Weekly Market Update for August 30, 2024

by Jim Ulland

The week ended with good news on inflation. A report called the PCE (Personal Consumption Expenditures) said the rate of inflation was unchanged in July at 2.5%. This was slightly below expectations. The Fed’s target for inflation is 2%, so we are close. This data supports the view that the Fed will cut interest rates in September and probably again in November and December. Falling interest rates help fixed income securities. For instance, our fixed income strategy, Intelligent Fixed Income, is producing double-digit returns so far this year. Stocks too should benefit from lower rates. Lower rates stimulate economic activity, especially housing.

The other big news of the week was Nvidia. The market looks to this chip (GPU) leader as an important view into the AI sector. The company reported that earnings and sales were great: earnings per share were up 152% vs. the same quarter last year. Revenues were up 122%. You can expect such a popular stock to be volatile and that was the story after the earnings announcement. The stock closed the week down about 8%. So far this year, including this week, the stock is up 141%. CEO Jensen Huang said that demand for their fastest GPU chips remains strong and that anticipation for the next-generation chips, out in Q4, is “incredible.” Naturally, Nvidia will not be able to sustain a 100% annual growth rate, but it will grow remarkably. Other AI companies reacted better to Nvidia’s news than Nvidia’s stock did, yet technology stocks were down modestly for the week.

Consumer confidence rose in August, which suggests a recession is no longer expected this year. Consumers viewed short-term inflation as trending lower, another positive. How the consumer views inflation can be a self-fulfilling prophecy. Unemployment claims were stable. The 30-year fixed rate mortgage fell to 6.43% and the 15-year was 5.83% today.

Geopolitical news continues as a potential market disrupter. Israel / Hamas / Hezbollah is the most critical. Ukraine is expecting more advanced weapons from Europe which will reach farther into Russia.

During the week, the S&P 500 was up +0.24% and the Nasdaq was down -0.92%. On Monday the S&P 500 was down -0.32%, Tuesday +0.16%, Wednesday -0.60%, Thursday 0.00%, and Friday +1.01%. The 10-Year Treasury, a rate indicator, was up 10bps to 3.91%. The 6-month US Treasury is a favorite of our US Treasury strategy. This week the yield ended at 4.86%.

Next week, the biggest news will come on Friday from the report on the number of new jobs created in August. Too few jobs created raise recession fears and too many stoke inflation fears. But all of that will not happen until Friday. Until then, celebrate the few remaining days of summer during this long weekend. Our office will be closed Monday and will open again on Tuesday.

The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Investors should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All investors are strongly urged to consult with their tax advisors regarding any potential investment.