weekly market update 8/16/2024

After falling almost 10% from July’s all-time highs through last week’s lows, the S&P 500 has rallied with a vengeance and registered seven consecutive days of gains to close the week less than 2% below record highs.  Underpinning this rally has been a resurgence in soft economic landing expectations as Wednesday’s CPI report showed the lowest rate of inflation (2.9%) since 2021 and Thursday’s retail sales report came in at its strongest levels since January 2023 (per FactSet).  With inflation continuing to moderate, expectations for the Federal Reserve to cut rates for the first time in four years during its next meeting in September have now risen to 100%.  Next week will be headlined by Fed Chairman Jerome Powell’s speech from the annual economic symposium in Jackson Hole, Wyoming on Friday.

EARNINGS SEASON IS NEARING AN END

The second quarter (Q2) S&P 500 earnings season is 93% complete and results have quietly been very strong.  Earnings growth is poised to rise almost 11% year-over-year, which would mark the highest growth rate for the S&P 500 since Q4 2021 (per FactSet).  Walmart’s earnings results this week were particularly important as the company noted that while consumers remained “value-seeking”, the company did not “see any additional fraying of consumer health”.  Few things are more correlated to market returns than earnings growth, so while interest rate cut expectations and renewed signs of strength from the US consumer are welcome developments, earnings have likely added support to this rally.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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