After a good July, August saw the markets pull back until the 24th, and then pare some of those losses to close out the month.
August Market Performance:
- Bonds:
- VAB – Canadian Aggregate Bond Index ETF: -0.4%
- VBU – US Aggregate Bond Index ETF: -0.8%
- VBG – Global ex-US Aggregate Bond Index ETF: 0.1%
- Equity:
- S&P500: -1.5%
- DOW: -2.4%
- TSX: -0.1%
- FTSE100: -2.6%
For the first ¾ of the month, the markets experienced a pull-back fueled once again by central bankers adding to the narrative that they will keep interest rates higher for longer.
However, towards the end of the month, in the US, the Personal Consumption Expenditures reading (the Fed’s preferred inflation measure as it doesn’t include volatile food and energy prices) was in-line with economist’s expectations of 4.2% for July. This spurred bets that the Federal Reserve will not raise interest rates again in September.
In a return to the bad-news-is-good-news narrative, the US added fewer jobs in August than expected. Private payrolls added 177,000 jobs, while the expected number was 200,000. This also fueled the hopes that there won’t be another rate hike in September. When the market starts to react positively to bad news on main street, it tends to signal further long-term returns and a return to more normal movements.
To shift gears and focus more on the broad topic of “Why does it feel so hard to make money recently?”
Over the past two years, the S&P500 was -0.60%, the DOW was -1.68%, the TSX was -1.23%, US Bonds were -18.19%, and finally the darling of 2023 the NASDAQ was -8.85% over the past two years.
I wanted to include the above numbers to provide some context to both the headlines and how many investors are feeling. Even with the NASDAQ’s 34% run this year, if you bought in 2 years ago, you’d still be in the red. The record pace of rate hikes, inflation, and constant recessionary fears over the past two years have left many investors battered and bruised. But investing is a long-term play and there may be good news on the horizon.
Looking at the chart above, 2023 has been positive (to varying degrees). With markets dipping into bear territory last year, coupled with lower inflation, and the potential for a pause in rate hikes (and maybe rate cuts) moving forward, I am optimistic looking forward, as these events indicate we are in the first inning of a market recovery.
