Monday, August 26th, 2024

This week's insights from Simplicity Wealth's

Thomas Rozman, CFA, CAIA | Partner & Chief Investment Officer

Matthew Opsal | Senior Manager Research Analyst

Week In Review

Ideal conditions continued for the financial markets, as a downward revision to previous employment gains in 2023 and 2024 bolstered the notion of a slowing labor market and forthcoming interest rate

reductions. Speaking at the Jackson Hole Economic Symposium on Friday, Federal Reserve Chairman Jerome Powell confirmed the changing point of view. “My confidence has grown that inflation is on a sustainable path back to 2%. The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” The near certainty of a more accommodative monetary policy sparked a rally in both bonds and stocks. Bond yields were lower across the curve but the gains were remarkable on the short end, with the 2-year Treasury note closing at a yield of 3.89%. The S&P 500 rocketed higher on the optimistic policy tenor, rising +1.5%.

This Week

The economic calendar is somewhat pedestrian for most of the week. However, in the context of the recent Federal Reserve pronouncements, the latest inflation update has greater significance for market momentum. The Personal Consumption Expenditures price index will be released on Friday and could justify the timing for an interest rate cut in September.

Portfolio Themes

Growth stocks have outperformed value stocks by a wide margin this year, but that historical return discrepancy has not been sustainable and suggests that market leadership may revert to those styles that represent better relative value. The prospect of a dovish monetary policy provides another reason that interest-rate-sensitive stocks such as financials and real estate investment trusts may flourish. Simplicity offers a direct indexing and tax-loss harvesting service that includes equal-weighted and dividend-paying indices that may help reduce concentration risk, exploit expanding market breadth and increase potential model portfolio returns.

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Data: Unless otherwise noted, data for charts, graphs, and tables is sourced from YCharts. Portfolio Themes chart sourced from J.P. Morgan Asset Management.

1Style box returns use various Russell indices tied to specific areas of the market cap (vertical) and style (horizontal) spectrums.

2 Index Statistics: P/E TTM – Calculated by dividing an investment’s price by the trailing 12-month earnings per share value. Yield – Expected dividend-per-share divided by current share price. Table statistics are updated monthly. MSCI indices represent broad global and international equity markets. Indices are typically not available for direct investment, are unmanaged, and do not incur fees or expenses. Past performance does not guarantee future results.

Weekly commentary and investment advisory services are provided by Simplicity Wealth, LLC a SEC Registered Investment Adviser. Registration does not imply a certain level of skill or training. The information provided is for informational purposes only and does not constitute any form of advice or recommendation. The information contained within has been obtained from various sources and is believed to be accurate at the time of publication.