After a bumpy start to the month that is estimated to have triggered a $6.4 trillion global stock sell-off and pushed the S&P 500 index down 7%, equity markets have steadily recovered nearly reaching an all-time high last Friday. Market participants seemed to be preparing for the long holiday weekend as equity markets moved sideways this week posting a decline of -0.2%. Bond markets played the role of portfolio diversifier this week advancing 0.3%, adding to the August advance month-to-date of 1.9% and 3.7% year-to-date. As recently as June, bond markets were posting negative returns year-to-date.
Last week’s annual Kansas City Federal Reserve Bank Jackson Hole Conference where central bankers gather to present their thoughts on monetary policy drew extra focus this year as the United States central bankers ponder change to the Federal Funds rate in over a year. A poll of economists by Bloomberg predicts a 25-basis point cut to 5.25% in September, the first reversal since the overnight borrowing rate was raised from 0.25% in March 2022. This same poll predicts another 50-basis point cut by year-end lowering the cost for banks to borrow overnight to 4.75%. In a speech at the conference Federal Reserve Chair Powell signaled the time is right to ease monetary policy considering a recent rise of unemployment to 4.3% and framed his speech to reflect that labor-markets have moved past “normalizing” and the risk for employment is tipped to the downside.
The Conference Board reported this week that consumers saw fewer jobs available in August as a sign of labor-market deterioration, yet confidence improved as slowing inflation offset waning optimism about the labor market. The Conference Board’s sentiment gauge increased to 103.3 from an upwardly revised 101.9 a month earlier but remains well below pre-pandemic levels. One-third of consumers responded that jobs were plentiful, the smallest share since March 2021 and the sixth decline in a row.
Contract closings on existing homes rose 1.3% in July, for the first time in five months signaling the housing market is stabilizing as the 30-year fixed rate has fallen to its lowest level since April 2023. Higher sales have occurred as contract rates on 30-year mortgages eased to 6.44%, helping to boost mortgage applications over the last few months. But further declines of mortgage rates will be necessary to get home buyers out to showings as the home affordability measures show that the typical family earns 93.3% of the qualifying income needed to afford a new home.
 |
 |
Sources: BTC Capital Management, ICE BofAML, MSCI, Institute for Supply Management, Bureau of Labor Statistics, Standard & Poors, S&P Global and National Association of Realtors
The information provided has been obtained from sources deemed reliable, but BTC Capital Management and its affiliates cannot guarantee accuracy. Past performance is not a guarantee of future returns. Performance over periods exceeding 12 months has been annualized.
This content is provided for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Statements in this report are based on the views of BTC Capital Management and on information available at the time this report was prepared. Rates are subject to change based on market and/or other conditions without notice. This commentary contains no investment recommendations and should not be interpreted as investment, tax, legal, and/or financial planning advice. All investments involve risk, including the possible loss of principal. Investments are not FDIC insured and may lose value.