By Rick Schwerd |
Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for
our next update on September 4.
Markets Take a Breather
After a strong first half of August, markets have pulled back this week as the Iranian situation turned more
negative. The 60-day “window to negotiate” that the U.S. and Iran agreed to ended this week with no
resolution in sight. President Trump threatened Iran with “economic D-Day” saying he will unleash the
“most crushing economic operation ever taken.” The threats have not appeared to alter Iran’s
position at this time.
As we have seen multiple times during the course of the conflict, when rhetoric and military action heat up, oil
rises, inflation fears increase, interest rates rise and equity markets become more volatile. The price of West
Texas Intermediate (WTI) crude dropped below $75 per barrel earlier this month but is now trading above $86. The
benchmark 10-year Treasury broke above 4.70 percent, near the top of its three-year trading range.
Equity markets have traded lower this week but remain close to all-time highs. The S&P 500 and Nasdaq indexes both remain up more than 12 percent
year-to-date. Historically, August through early October is the weakest period of the year for stocks. September is
the only month of the year that has averaged a negative return for stocks, though the average is only about a
negative 0.6 percent return. However, last September, the S&P 500 broke that pattern with a positive 3.5
percent. It’s worth noting that we may see some additional volatility as we close out summer and move into
fall.
Fed Rate Hike Off the Table?
Up until recently, there was a good deal of chatter that the Federal Reserve may raise rates a quarter of a point at
its upcoming September meeting. We may receive more news when new Fed Chairman Kevin Warsh speaks at the Jackson
Hole Economic Symposium next week. However, a disappointing July employment report earlier this month and benign
inflation data last week seemingly took the possibility of a rate hike off the table.
The July labor report showed a surprising loss of 23,000 jobs during the month, while economists were expecting an
increase of 100,000. The estimated increases for the prior two months were also revised down significantly. Last
week’s Consumer Price Index (CPI) data showed a slight decrease during July. Headline CPI dropped from 3.5
percent to 3.4 percent, while core CPI, which removes volatile food and energy prices, also dropped a tenth of a
point to 2.5 percent.
Looking Ahead
Next week marks the last big hurrah for the second-quarter earnings season and the world’s largest company by
market value, Nvidia, reports on Wednesday. As we previously mentioned, the Jackson Hole Economic Policy Symposium
takes place next Thursday through Saturday, with Chairman Warsh giving a speech on Friday. Historically, there has
been some market-moving news that has come out of the symposium.
The following week we get the August employment report. The report will be closely watched to see if July’s
weakness continues or if we get a rebound.
As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out
to us at (518) 415‑4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a
Senior Investment Officer at Arrow Bank. He oversees individual and corporate retirement plans, personal trusts,
investment management accounts, foundations and not‑for‑profit relationships.