The East Coast Advisory team hopes that you enjoyed your 2023 summer season. Back to school season is here. We know this is a very busy time for everyone. We're here to help. This is a perfect time of the year to schedule a meeting with us before the busy holiday season quickly approaches.
That said, we're gearing up for all things Fall - football, Oktoberfest beers, and pumpkin-flavored everything. Looking for some fun things to do over the next couple months? We've got you covered.
Before we jump into our Market Update, please take a look at our upcoming complimentary events:
As always, the above events are on a first come, first serve basis. Please reach out to your ECA Advisor if you'd like more information and specific details on the above events. We'd love to host you and your guests!
Despite the hope for a continued market upswing, the positive trends we saw in July did not carry into August, and the Dow, Nasdaq, and S&P all finished down for the month.The Federal Reserve (Fed) didn’t meet in August, so interest rates remained unchanged. However, the consensus is the Fed will likely implement another interest rate increase at their September meeting (with potentially one additional hike before the end of the year).
Though inflation remains higher than the Fed’s target rate of 2%, the U.S.’s current 3.3% rate is certainly more palatable than the inflation rates throughout much of Europe. The United Kingdom’s Consumer Price Index rate was 6.8% in July (slightly more than double that of the U.S. rate), while the Eurozone Harmonized Index of Consumer Prices rate came in at 5.3% for the same period.
What you need to know about inflation: Inflation is the overall rise in the prices of goods and services over time, as measured by the Consumer Price Index (CPI). At lower rates, inflation keeps the economy healthy. Conversely, higher inflation can result in:
August brought abundant weather-related tragedy, with devastating wildfires in Canada, Hawaii, and elsewhere. The August 8 fire that razed the historic Hawaiian town of Lahaina was one of the deadlines in modern U.S. history, with at least 115 people confirmed dead and more than 1,000 still missing. Many parts of the world (Greece, Spain, southern France, and elsewhere) remain on high alert for fire danger, with higher-than-normal temperatures, drought conditions, and high winds.
September is "Life Insurance Awareness Month." How well do you understand this crucial pillar in financial planning? Life insurance provides a safety net that ensures the well-being of loved ones even when you're no longer there to support them, and policy proceeds can cover outstanding debts, funeral expenses, and the ongoing needs of your family, such as mortgage payments, education costs, and daily living expenses. Beyond its practical benefits, life insurance offers peace of mind, knowing that your family's future is secured. Contact us this month if you still need to put this protection in place.
With the approach of fall, the days become shorter, and temperatures cool down. We hope you can take advantage of the good weather and enjoy your favorite outdoor activities with family and friends. If you have concerns or questions about your finances, just give us a call. And to leave you with a bit of humor, in honor of “Talk Like a Pirate Day” on September 19, we’ll share this groaner of a joke: “Did you hear about the pirate who got angry every time his ship floated away? He had to take anchor management classes.”
In August, equities struggled as some of their months-long winning streaks came to a halt. All three major equity indices, the S&P 500, the Dow Jones Industrial, and the NASDAQ were all down 1.50% or more in August. The main driver of poor performance has been the reckoning that yields will stay “higher for longer.” This implies that the Federal Reserve (Fed) may not hike rates much (if any) more, but they will likely keep rates at their current level until mid to late 2024. In addition to the news about rates, some investors undoubtedly decided to take profits and sell/trim equities after earning over 20% on the S&P 500 through the first seven months of the year.
August was largely a reversal from previous months, which were driven by large Tech companies dubbed the “Magnificent 7.” Despite positive earnings reports from companies like NVIDIA (which blew analyst expectations out of the water), Tech did not drive markets higher. The Bloomberg Magnificent 7 Index (Ticker: BM7T) was down 0.08% on the month. Although earnings season was better than expected for most firms, many issued negative guidance moving forward based on the cost of capital increasing and set to stay “higher for longer.” The energy sector was the only positive performer, largely because oil prices moved slightly higher, up 5.84% in August, with WTI (the oil industry benchmark) closing at $84.70. The Utility sector was the largest detractor to performance in August, as natural disasters ravaged the country and caused headaches for utility companies.
The Federal Reserve did not meet in August, with their next meeting scheduled for September 20th. There was, however, a gathering in Jackson Hole, WY, known as the Jackson Hole Symposium, where Central Bankers from around the world discuss global events and financial trends. Here, Fed Chairman Powell gave a speech to the press about the current state of the Fed and their plans moving forward. When analyzing both the August press conference and the July rate hike announcement, the overall sentiment is that September’s meeting will be data-dependent. Despite a neutral stance from Chairman Powell, the “higher for longer” narrative trickled into the bond market, with all three major bond indices trading down at the end of the month. This is due to a rise in yields, which move inversely to bond prices. The 10-year treasury closed August trading at 4.091%, 13 bps higher than it started the month. Shorter-term yields fell slightly, with the two-year treasury trading at 4.851%, a 3 bps drop from its August open.
From an economic standpoint, August was the first month we started to see what a soft landing might mean. The Leading Economic Index (LEI) is a leading indicator that usually forecasts where the economy is headed. LEI considers different indicators like broad manufacturing and consumer confidence, as well as equity prices. The indicator was negative for the 16th consecutive month, showing weakness in the economy. However, continued resilience from consumer spending and corporate earnings also reared their heads in August, showing why they have kept us out of a recession.
AI Gives Paralyzed Woman
Ann was 30 years old when she suffered a brainstem stroke that paralyzed her. Now, 18 years later, a team of scientists at the University of California San Francisco have found a way for her to talk again. Through 253 electrodes implanted on the surface of her brain, her “talking” brain signals are intercepted and decoded by several linked computers. With the help of artificial intelligence (AI), an on-screen avatar speaks for her, complete with facial expressions and even her own voice.
According to these scientists, this is the first time AI has been used to create speech or facial expressions from brain signals. The team spent several weeks training the system’s algorithms to recognize Ann’s brain activity patterns associated with various sounds. Once the system learned the sounds, it could decipher any English word. Through a customized machine-learning process, a computer avatar could speak while imitating Ann’s movements and facial expressions. The avatar’s voice is Ann’s, captured from an audio recording made years earlier.
The team is currently working on a wireless version, so users won’t have to be connected to a bank of computers each time they communicate via the avatar. Click here to read more on this remarkable achievement.
THOUGHT FOR THE MONTH
Dow Jones Industrial Average: The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.
Dow Jones U.S. Real Estate Total Return Index: The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.
NASDAQ Composite: The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.
S&P 500 Bond Index: The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.
S&P 500 Consumer Discretionary: The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.
S&P 500 Consumer Staples: The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.
S&P 500 Energy: The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.
S&P 500 Financials: The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.
S&P 500 Index: The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.
S&P 500 Utilities: The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.
S&P U.S. Aggregate Bond Index: The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.
S&P U.S. Treasury Bond Index: The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.
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A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.
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Certain information may be based on information received from sources the Osaic Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Osaic Research Team only as of the date of this document and are subject to change without notice. Osaic has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Osaic is not soliciting or recommending any action based on any information in this document.
Monthly Market Newsletter, August 2023
September 18, 2023