July allowed several markets to move into new all-time highs. However, the market became turbulent in the second half of the month, with the mega-cap technology stocks losing ground and small-cap stocks making a significant gain. However, the first two days of August erased most of the small-cap gains. More on this at the end of August
Market Returns for July 2024 and YTD as of July 31, 2024:
Index | July | YTD |
S&P 500 | 1.13% | 15.78% |
Nasdaq | -0.75% | 17.24% |
DJIA | 4.41% | 8.37% |
The June consumer price index (CPI) report showed reduced inflation under 3% and moving towards the target of 2%. This report catalyzed the market turbulence in the second half of the month. Interest rate cuts in September are being discussed. I believe there is a 50% chance of a rate cut in September and will rely on July and August CPI reports and gross domestic product (GDP). I have written a short inflation report that I will post next week.
July Portfolio Changes
I made no changes in the portfolios in July, which produced a very positive return for July in our stock holdings. Your returns are available from your advisor or by logging into our performance software.
August Possible Changes
I will extend the bond duration this month in preparation for reduced rates. I have not selected the exact change yet, but I will do so soon.
AI & Semiconductors
The last two weeks have been rough for AI & semiconductor companies. In May's review, I posted a comparison between Nvidia and Cisco. It is impossible to say that the AI craze is over. We follow AI every day. It is not because you own it; we want to know what it is doing. We do own semiconductors in an exchange-traded fund (ETF), which the AI impacts. The semiconductor index was down 9.7% last week but is still up 10.4% for the year.
I usually don't make rash changes based on market movements like we have seen the last two weeks impacting our semiconductor holdings. I don't plan to do so this time as they usually lead to a wrong decision.
Is A Recession Looming?
As of Thursday, the Atlanta Fed’s GDPNow tracker indicated 2.5% annualized growth in the quarter. While that will likely be revised down, given the labor market data we got Friday, it’s still inconsistent with the sort of slowing growth that tends to precede a recession. As shown below, it follows a series of solid, if not spectacular, growth in 2023 and the first half. Growth will need to slow very rapidly to get to a recession.
(1)
(1) Chart by Bespoke.com
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