Latest / Markets with Megan: A Quick Financial Markets Update / Fed Rate Cuts on the Horizon? Analyzing August's Trends | Episode 167 | 09-05-24

Transcript

Fed Rate Cuts on the Horizon? Analyzing August's Trends | Episode 167 | 09-05-24 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: When we look back at the month of August, we saw one heck of a turnaround in the equity markets.
• 0:05
  Megan Horneman: It is Markets with Megan, it's Thursday, eptember 5th, and we wanted to give a brief recap of what we saw from an economic and a market perspective in the month of August.
• 0:15
  Megan Horneman: If you remember, in the first week of August we were looking at the S&P down over 7%.
• 0:20
  Megan Horneman: We had some pretty big declines in just a short period of time there in the very beginning of August, and we saw a massive turnaround in the markets.
• 0:29
  Megan Horneman: And what drove that turnaround?
• 0:31
  Megan Horneman: It was a few things.
• 0:31
  Megan Horneman: First of all, inflation continued to improve, so that opened up the door for potential Fed rate cuts.
• 0:38
  Megan Horneman: In September the labor market started to weaken and typically that would be a bad thing.
• 0:43
  Megan Horneman: But now that we're seeing some major cracks in the labor market, it again is kind of verifying that the Fed can come in and start cutting interest rates.
• 0:52
  Megan Horneman: The consumer also even though we've had high inflation for several years and weak consumer sentiment, we did see a rebound in retail sales for the month.
• 1:03
  Megan Horneman: So what you had from an economic standpoint was data that's solidifying it's okay for the Fed to cut rates but also data that's not showing the consumers completely falling off a cliff yet, and that's been the biggest concern here.
• 1:16
  Megan Horneman: So how did this translate into equity and bond market performance?
• 1:20
  Megan Horneman: So equities turned around and US equities ended the month on a positive note.
• 1:25
  Megan Horneman: But we did see a shift here, this rotation out of those growth names.
• 1:30
  Megan Horneman: You saw value actually outperform growth by about 60 basis points when you look at the Russell 1000 Value and Growth Index.
• 1:38
  Megan Horneman: So we got some more of those areas of the market that have been lagging catching up in the month of August.
• 1:43
  Megan Horneman: From a fixed income perspective, we did get bond yields to go lower.
• 1:47
  Megan Horneman: So prices were higher, and that's because there's the likelihood that the Fed will cut interest rates.
• 1:53
  Megan Horneman: But we had some of those riskier sectors of fixed income participate in the global equity rally that we saw.
• 1:59
  Megan Horneman: So risk assets there did better, high yield did better, emerging market bonds did better, and when you looked at commodities, they were relatively flat for the month.
• 2:09
  Megan Horneman: We had some mixed information there.
• 2:12
  Megan Horneman: Energy and grains were both lower, but grains were dragged lower by soybeans and corn, and then both crude oil and heating oil were down for the month.
• 2:23
  Megan Horneman: So you have this concern here that if the economy is slowing globally enough for the Fed to cut interest rates.
• 2:29
  Megan Horneman: Then we could have less demand for commodities.
• 2:32
  Megan Horneman: That's all we have to wrap up the month of August there.
• 2:35
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• 2:38
  Megan Horneman: Hit that alarm bell if you can.
• 2:40
  Megan Horneman: And if you'd like other of our podcasts, you can go to our full library of them on marketswithmegan.
• 2:45
  Megan Horneman: fm.
• 2:46
  Megan Horneman: Thank you,