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Summer Surge
After a challenging July that saw investors sell off high-flying technology stocks, buyers returned to the market in August, bidding up risk assets across the board. Buoyed by a slew of tepid economic data, expectations for the Federal Reserve’s September interest rate cut rose to near certainty. This served as a catalyst for equities and bonds alike.
The month kicked off with the July jobs report, which came in at 114,000, significantly below expectations of 185,000 jobs, and a June report that saw 179,000 jobs added to the economy. The weak jobs number increased the unemployment rate to 4.3%, the highest level since October 2021.
The July Consumer Price Index (CPI) report confirmed perceptions of a cooling economy as inflation slowed to 2.9%, the lowest level since March 2021. The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures Price Index (CPE), met expectations for an annual increase of 2.5% for the 12-month period ending in July. Core CPE, which excludes volatile food and energy prices, came in at 2.6% for the 12-month period, below expectations of 2.7%.
The bond market welcomed the progress on the inflation front, pushing the yield on the benchmark 10-year U.S. Treasury down from 4.0% at the end of July to 3.9% on the last trading day before Labor Day weekend (bond prices move inversely to yields).
A rebound in technology stocks drove the Core Large Cap Equity category to a 1.6% gain in August. Meanwhile, the Core Fixed Income category gained 1.5% as bond prices benefitted from lower yields.
For the Nasdaq Dorsey Wright Explore portion of HANDLS Indexes, interest-rate-sensitive categories remained the big beneficiaries of declining interest rates. REITS and Utilities saw gains of 5.6% and 4.8%, respectively, for August. After a disastrous 2023 that saw significant losses, Utilities are now the top-performing category on a year-to-date basis with a return of 22.1%. As in July, MLPs were once again the worst performer, gaining 0.5% in August, but remain up 18.3% for the year.
HANDLS indexes delivered positive returns across the board in August:
- Nasdaq 5HANDL™ Index: 2.1%
- Nasdaq 7HANDL™ Index: 2.6% (1.3x leveraged)
- Nasdaq 10HANDL™ Index: 3.8% (2.0x leveraged)
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