Two significant pieces of economic information were released this week. The first was the revision of payroll growth for the 12-month period through March of this year. The revision, which lowered the increase in employment growth by 818,000, was the largest revision since 2009. For those economists that have been forecasting weaker growth in the United States, the revision lent support to their narrative of a slowing economy. It is important to note, however, that the final figures for this time period will not be released until February 2025.
The other major piece of information on the economic front released this week was the minutes from the Federal Open Market Committee (FOMC) meeting held on July 30-31. The minutes revealed that while no action was to be taken at that meeting there was a significant level of support for a cut in the Fed Funds rate at the committee’s meeting in September. Financial markets currently project a cut of 0.25% will be implemented at that time.
On the financial markets front, we saw continued recovery from the chaotic start to the month with both bonds and stocks advancing. The broad fixed income market returned 0.4% for the week and now has a year-to-date return of 3.6%. Declining yields were a contributor to the positive return as the 10-year Treasury issue saw its yield decline to 3.84% versus the 3.91% from a week earlier.
Equity markets produced an even stronger return for the week with the Russell 3000 Index of domestic equities generating 5.5% for the period. Underlying the return was outperformance of growth stocks versus their value counterparts. In addition to the higher return for the week, growth stocks are also outperforming value stocks on a month-to-date basis. The value segment is however still retaining its quarter-to-date leadership with the Russell 3000 Value Index return at 5.5% while growth lags at 1.5%. International equities also rose with the MSCI EAFE Index posting a return of 2.1% for the week.
Over the next week investors will be focused on Chair Powell’s speech at the Kansas City Federal Reserve’s annual Jackson Hole symposium for direction on prospective cuts to the Fed Funds rate. Also, NVIDIA will be releasing its quarterly earnings report. Over the past four quarters the company has handily surpassed estimates and this quarter’s results will be evaluated as to the company’s future potential, as well as the level of momentum behind the ongoing development on the Artificial Intelligence front.
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Sources: BTC Capital Management, Bloomberg, FactSet Research, FTSE Russell
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