Market Recap: Markets Rebound on Fed Chair Powell’s Comments
Stocks had a bumpy start to the week, as investors kept a close eye on global events and some profit-taking in big tech names. Hopes for progress in peace talks between Russia and Ukraine, and cautious comments from Fed officials about keeping interest rates high, made investors uneasy. As a result, the S&P 500 stayed under pressure through midweek.
Things turned around on Friday after Federal Reserve Chair Jerome Powell spoke at the Jackson Hole meeting. He said the Fed may be open to cutting interest rates in September, noting that slowing job growth is now a bigger concern than inflation. That shift in tone sparked a strong rally across the market. The S&P 500 jumped more than 1.5% on Friday and finished the week slightly higher, while small cap stocks soared nearly 4% to new highs for the year. Commodities also joined the rally, with oil and gold both gaining for the week, while bond yields pulled back as investors bet on a rate cut.
Looking ahead, Powell’s comments gave the market a short-term boost, but the bigger picture hasn’t changed much. Inflation is still running hotter than the Fed would like, and the job market is showing some signs of slowing. For now, the setup remains positive with steady (yet slow) economic growth, the Fed seemingly beginning to lean supportive, and momentum currently providing a bullish tailwind for stocks, but we’re also watching risks closely. If inflation stays high while growth slows, i.e. “stagflation”, that could be a problem down the road.
Source: stockcharts.com
The Week Ahead: Inflation and the Consumer
The economic calendar is busy this week, with a few key reports that could move markets. On Wednesday, July new home sales will give a fresh look at the housing market, a key gauge of consumer demand. Thursday brings the weekly jobless claims report, which is becoming borderline concerning given the recent rises and revisions. Then Friday is the big day, with the release of the Fed’s preferred inflation measure, Core PCE.
Alongside the economic data, several major retailers are set to report earnings. These updates will offer further insights into how retailers are handling higher costs and shifting consumer behavior.
With both economic reports and company retail earnings on deck, investors can expect plenty of market-moving headlines. Together, these reports will shape how confident investors feel about growth, inflation, and the Fed’s next steps as we head into September.
Broad Overview: Optimistically Attentive
So far this summer, markets have shown remarkable resilience, reaching record highs as steady consumer spending, solid corporate earnings, and growing expectations for potential Fed rate cuts supported sentiment. Large-cap stocks, particularly in technology and AI, led the way, while international markets benefited from easing inflation and a softer U.S. dollar. It’s an encouraging backdrop, but looking closer, the picture is a little more nuanced.
Inflation appears “sticky” while tariff costs may have just shown up in the recent producer prices report. Hiring is slowing down and unemployment is on the rise with modest GDP growth this year. These factors are likely the reason consumer confidence has leveled off. This mix of slower growth and persistent inflation is why the Fed remains cautious, waiting for more data before committing to rate changes. Meanwhile, trade tensions and geopolitical uncertainty continue to exacerbate the whole issue.
Despite the challenges, the stock market continues to carve out new highs and the rally appears to be spilling over to sectors other than technology that have been left behind. A broadening rally is a powerful force that historically tends to move further than most believe possible.
As investors, it’s important to be aligned with the market’s trend while gathering clues from economic data and corporate signals to adapt should conditions shift. We will continue to gather data and report our findings in these missives, but should you have any questions regarding your current strategy or the markets in general, please reach out to your CIAS Investment Adviser Representative.
Important Disclosures:
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The statements contained herein are solely based upon the opinions of Edward J. Sabo and the data available at the time of publication of this report, and there is no assurance that any predicted or implied results will actually occur. Information was obtained from third-party sources, which are believed to be reliable, but are not guaranteed as to their accuracy or completeness.
The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Capital Investment Advisory Services, LLC (CIAS) reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.
CIAS is a registered investment advisor. More information about the advisor, including its investment strategies and objectives, can be obtained by visiting www.capital-invest.com. A copy of CIAS’s disclosure statement (Part 2 of Form ADV) is available, without charge, upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact us at (919) 831-2370 if you would like to receive this information.
Capital Investment Advisory Services, LLC
100 E. Six Forks Road, Ste. 200; Raleigh, North Carolina 27609
Securities offered through Capital Investment Group, Inc. & Capital Investment Brokerage, Inc.