Economy
The Fed's annual symposium at Jackson Hole took place this week, which gave recently appointed Chair Kevin Warsh an opportunity to deliver some remarks. True to his style, there weren't any major revelations uncovered. The big takeaways from the speech were a doubling down on both a commitment to deliver 2% inflation and full employment. In addition, Warsh continues to express a desire to remove any forward guidance language regarding the Fed's decision with interest rates. To the inflation goal - the Fed's preferred inflation gauge (the personal consumption expenditures index - PCE) was out this Wednesday, and core inflation remains above target at 3.3%. This number was in-line with expectations and was just a 0.2% increase since the previous month (which saw an increase of 0.1%). These last couple of readings paint a picture of elevated yet steady inflation and are the types of reports that will get the Fed closer to its target. It's basically a coin flip as to whether or not the Fed will leave rates unchanged or raise by 0.25% when they meet next on September 16.
Markets
The S&P 500 posted a modest gain of 0.49% for the week, although it was another lower day Friday as the markets reacted to Kevin Warsh's speech. We may be contending with rates remaining higher for longer than markets were hoping just a few weeks ago. The interest rate on the 2-year treasury bond experienced the largest single day move higher since March on Friday after the speech. The 2-year Treasury yield tends to move closely with the market’s expectations for where the Federal Reserve will set the federal funds rate over the next couple of years.
AI stocks came under pressure Friday after disappointing results from Marvell, with Nvidia falling 4.6% on the day despite still finishing the week up more than 4%. Investors continue to set a very high bar for AI-related companies, making stocks more sensitive to anything that falls short of expectations. We're heading into September next week, the worst month from a historical average standpoint. On average, the market loses ~1% in September. However, Ryan Detrick from Carson Group shows that when you head into September with a bit of momentum, you've seen that trend bucked. This shouldn't be interpreted as a lock for a September gain, but does provide some broader context.
What We're Reading
- The DIY Dilemma- Jordan Grumet
- The Nine Circles of Financial Hell- AJ Ayers
Have a great weekend.
Dogwood Wealth Management