Archives: Insight

Weekly Market Insights – Monday, September 16, 2024

Stocks Bounce Back Ahead of Fed’s September Meeting:

Markets rallied last week as investors reacted positively to better-than-expected consumer and producer inflation data. This suggested that inflationary pressures may be easing, leading to renewed optimism as investors eagerly await the Fed’s next rate decision.
The Dow Jones Industrial Average rose 2.60%, while the S&P 500 Index gained 4.02%. The Nasdaq Composite led, picking up 5.95% as tech stocks rebounded. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 1.01%.1,2

Source: Bloomberg Finance, L.P. (Performance data normalized 8/1/24 = 0)

A Wednesday to Remember

Stocks fluctuated out of the gate to start the week as “risk on” investors made moves before the pending release of the twin inflation reports–the Consumer Price Index (CPI) and Producer Price Index (PPI). The three major averages finished slightly more than 1% higher in Monday trading.3
On Wednesday, stocks initially dipped following the release of the CPI as traders appeared disappointed by the report. By midday, that sentiment changed. The S&P 500, down as much as 1.6% in early trading, gained 1.1% by the closing bell. More inflation data out Thursday showed wholesale price increases were tempered, which helped stocks move higher through the balance of the week.4,5

Sources: U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Charles Schwab

Small Caps Shine

Small-cap stocks, as measured by the Russell 2000 Index, have pushed higher in recent weeks, which is a telling move for some Wall Street observers. The Russell 2000 has outperformed the S&P 500 by more than 4% during Q3 so far.6
One reason is that smaller stocks tend to respond when they anticipate interest rates will trend lower. Investors appear to be positioning themselves in small cap issues, expecting the Fed may adjust rates at its September meeting as it attempts to guide the economy to a soft landing.7

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, September 13, 2024
2Investing.com, September 13, 2024
3The Wall Street Journal, September 10, 2024
4The Wall Street Journal, September 11, 2024
5CNBC.com, September 12, 2024
6The Wall Street Journal, September 13, 2024
7MarketWatch.com, September 12, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, September 9, 2024

All Eyes on the Fed as Economic Data Shakes Up Markets:

Stocks fell last week as disappointing economic data reignited recession concerns among investors as they closely monitor the Federal Reserve’s next move regarding interest rates.
The Dow Jones Industrial Average lost 2.93%, while the S&P 500 Index dropped 4.25%. The tech-heavy Nasdaq Composite fell 5.77%. The MSCI EAFE Index, which tracks developed overseas stock markets, declined 2.91%.1,2

Source: Bloomberg Finance, L.P. (Performance data normalized 07/26/24 = 0)

Economic Data Unsettles Investors

The four-day trading week got off to a rough start as weak manufacturing data reawakened recessionary fears. All three major averages were down for the first session after the Labor Day holiday. For many, it was reminiscent of August 5th, when stocks tumbled as recession worries unsettled investors.3
Attention shifted to Friday’s jobs report as stocks traded narrowly. Markets initially reacted positively to news that job growth rebounded slightly and unemployment ticked down. However, selling pressure increased as the trading session progressed and investors digested the underlying data. The S&P 500 had its worst week since March 2023.4

Sources: U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Charles Schwab

Anticipating the Fed’s September Meeting

The Federal Reserve seems poised to make a tough decision regarding monetary policy in its September meeting. The jobs market and other softening economic data have quickly overshadowed concerns about inflation. However, there’s still a case to be made for a soft landing.
Job growth in August was slower than expected, but 142,000 jobs were created–an uptick that some would argue is an overall positive despite missing expectations. The drop in the unemployment rate to 4.2% bolstered the soft-landing narrative.5
Market observers anticipate a 0.25% rate adjustment in September, but some contend that the Fed may consider a more significant move. On Friday, Fed Governor Christopher Waller said he was open to a larger move if necessary. Chicago Fed President Austan Goolsbee and New York Fed President John Williams commented similarly during the week.6,7

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, September 6, 2024
2Investing.com, August 30, 2024
3The Wall Street Journal, September 3, 2024
4The Wall Street Journal, September 6, 2024
5The Wall Street Journal, September 6, 2024
6Marketwatch.com, September 5, 2024
7CNBC.com, September 6, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

What Comes Next? Understanding the Fed’s Focus on Full Employment

By Gary Aiken | September 5, 2024

My family and I finally caught Hamilton on Broadway this weekend, ticking off a plan we had back in 2020 before the pandemic hit. The pandemic shutdown not only interrupted our lives but kicked off an unprecedented economic policy response. The Federal government approved trillions of dollars of stimulus which the Federal Reserve funded through a rapid increase in money supply. Predictably, this resulted in historic inflation. To unwind the inflation it created, the Fed raised interest rates to decrease the money supply, slowing the pace of inflation and the overheated economy. Here we are in 2024 having come full circle. The economic lows and highs of the pandemic seem to be fading away and we finally completed our family trek to Broadway. While I watched King George III’s character in the musical sing after the American Revolution, I too wondered as an investor, “What comes next?”
Chairman of the Federal Reserve, Jerome Powell, gave us some indication of what comes next regarding monetary policy. Following a rise in the unemployment rate and significant revisions to payroll numbers, the Fed will be increasingly focused on the “full employment” part of its mandate. We should expect lower short-term interest rates soon, but a rising unemployment rate is often a lagging signal that the recession is here. How fearful should investors be that our 20% probability recession call needs to rise? Let’s count the ways.
First, monetary policy has been restrictive for a long period. The Fed may be further behind the curve than recognized. A central bank policy mistake is one of the main historical reasons we have had recessions. Second, the Sahm rule was breached. Economist Claudia Sahm proposed this “rule” that implores the government to do something to prevent an economy from going into recession around the time that the three-month average unemployment rate has risen by half a percentage point or more. Third, the yield curve has been significantly inverted for some time (long-term rates lower than short-term rates discourage investment for the future and slow current economic growth). The inversion is almost cured and, in the past, the resolution of the yield curve inversion to a more normal shape (upward sloping) has indicated that the recession is nigh. Fourth, company earnings were quite good for the second quarter, but there were signs that segments of the American consumer are almost tapped out and significant signs that companies no longer possess their pandemic pricing power.  Finally, let’s return to where we started. Unemployment is a lagging indicator – by the time unemployment rises significantly, it’s too late for policymakers to do much to prevent the recession.
Now that we are sufficiently depressed let’s take a step back. The U.S. economy is still in decent shape. Talking with other Chief Investment Officers, it seems like many of us (who have to actually buy and sell securities for clients) are focused on one statistic in particular. The chart below shows U.S. Continuing Jobless Claims. Continuing claims indicate that a person actively went to a state unemployment agency and filed to receive unemployment compensation for at least two weeks in a row. Taking the pandemic out of the picture, we see that about 2 million Americans were in this transient state between jobs for the five years or so before the pandemic. For the past two and a half years, the average has been about 1.7 million Americans filing continuing claims, and today, that number is approximately 1.9 million – still below the pre-pandemic average.

U.S. Continuing Jobless Claims Below Pre-Pandemic Average

Source: Bloomberg Finance, L.P.

You may have seen news that the Bureau of Labor Statistics revised the number of jobs created in the United States downward by 818,000 jobs for the prior year. The reasons for this large negative revision are many. Analysis shows the main culprits are the treatment of “undocumented” workers in the official numbers and that survey-based measures’ reliability in general have become increasingly fraught as individuals and businesses give up phone landlines. Initial and continuing jobless claims don’t use assumptions – workers who have been laid off or fired must contact their state unemployment offices to get a check. Money talks, and this gives confidence in that statistic above others.
In our view, “what comes next” is an environment where companies can take advantage of lower interest rates for the first time in two years. The economy is already on solid footing, and companies’ earnings have been good. According to FactSet, through mid-August, 93% of S&P 500 companies had reported earnings; of those, 79% had earnings that exceeded Wall Street estimates, and 60% had revenues that exceeded estimates. Earnings for the second quarter grew 10.9% compared to the same period a year ago. As we said in our Halftime Report, any recession (albeit a low probability) is likely to be short and shallow, and if the stock market declines, retreating prices would present a chance to buy great companies at good prices.

Lower Interest Rates Rationalize Current Price-to-Earnings Ratios

Source: Bloomberg Finance, L.P.

In 1989, Warren Buffett wrote, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” On average, U.S. stocks seem mostly wonderful and priced fairly for now. Stock buyers today are not coming in at terrific bargains. Price-to-earnings ratios are higher today than in the past three years. Companies may justify those price multiples because managements deliver significant value to shareholders. Further, lower interest rates will bring opportunities to grow through acquisition and debt refinance, and future profits will have higher present values. Periodic declines in stock prices are regular occurrences for stock investors, but amidst a growing U.S. economy, stocks present good relative value for patient investors.

Author

Gary Aiken, Chief Investment Officer

Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection, as well as trading and investment operations.

Gary has over 21 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.

—

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure. The information in this article includes the opinions of the author and may not accurately reflect the opinions or values of Concord Wealth Partners or its affiliates.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM, or any non-investment related content, made reference to directly or indirectly in this newsletter) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM.

To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to their individual situation, he/she is encouraged to consult with the professional advisor of their choosing. CAM and CWP are neither law firms, nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.concordassetmgmt.com. Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Tuesday, September 3, 2024

Markets React to Key Economic and Earnings Reports:

Last week saw mixed results for stocks, driven by a combination of upbeat economic data and the release of a critical Q2 corporate earnings report ahead of the Labor Day weekend.
The Dow Jones Industrial Average rose 0.94%, while the S&P 500 Index increased 0.24%. The Nasdaq Composite lagged, falling 0.92%. The MSCI EAFE Index, which tracks developed overseas stock markets, gained 0.35%.1,2

Source: Bloomberg Finance, L.P. (Performance data normalized 08/5/24 = 0)

Key Economic Data

Markets began the week quiet as investors awaited Q2 earnings from Nvidia, the world’s most influential name in artificial intelligence.
The chipmaker–the second largest stock in the S&P 500 by market capitalization–dipped on the news, putting pressure on the Nasdaq and S&P 500. (The Nasdaq and S&P 500 are market-weighted averages, so larger companies have an outsized impact.)3
Nvidia is mentioned to show its influence on the overall stock market. It should not be considered a solicitation for the purchase or sale of the company.
On Thursday, an upward revision in Gross Domestic Product (GDP) data boosted markets, although stocks fell later in the day. Friday’s Personal Consumption and Expenditures (PCE) data seemed to confirm that inflation remained tame, welcome news for investors who are anticipating the Fed may adjust rates in September.4

Sources: U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Charles Schwab

Softer Landing in Focus?

Several pieces of data helped build a narrative that the economy may be coming in for a soft landing.
Second-quarter GDP growth was revised upward, from 2.8% to 3.0%. That’s an improvement from Q1 GDP, which rose 1.4%. Some market watchers were concerned about the Q2 revision after pending home sales in July hit its lowest monthly level in 23 years.5
Meanwhile, the Federal Reserve’s preferred measure of inflation, the PCE Index, came in 0.2% higher in July – in line with expectations. Core PCE inflation, which the Fed tracks closely, edged up 0.2% – also in line with forecasts.6

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, August 30, 2024
2Investing.com, August 30, 2024
3The Wall Street Journal, August 28, 2024
4The Wall Street Journal, August 30, 2024
5The Wall Street Journal, August 29, 2024
6CNBC.com, August 30, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, August 26, 2024

Market Rally Continues as the Fed Signals It’s Time for Rate Cuts:

Stocks saw more notable gains last week as encouraging remarks from the Federal Reserve supported the market’s rebound from early August lows.
The S&P 500 Index rose 1.45%, while the Nasdaq Composite added 1.40%. The Dow Jones Industrial Average picked up 1.27%. The MSCI EAFE Index, which tracks developed overseas stock markets, gained 2.98%.1,2

Source: Bloomberg Finance, L.P. (Performance data normalized 07/26/24 = 0)

Dovish Week

Stocks started the week strong, rallying after Wall Street welcomed dovish comments from Minneapolis Fed President Neel Kashkari. The S&P 500 and Nasdaq each posted gains on Monday — the 8th consecutive winning session. The Dow rose for the 5th session in a row.3,4
From there, markets traded in a narrow band until Wednesday afternoon when minutes released from the July 30-31 FOMC Meeting revealed more dovish comments. On Thursday, stocks dipped ahead of Fed Chair Jerome Powell’s annual Jackson Hole, Wyoming, speech.5,6
Well-received comments from Powell on Friday boosted markets, with all three averages closing higher.7

Sources: U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Charles Schwab

“The Time Has Come”

The Fed’s annual symposium for global central bankers started Friday morning with Fed Chair Powell’s much-anticipated speech. Citing the risk of the labor market cooling even further, he said, “the time has come for policy to adjust.”
Investors responded favorably, with the remaining question being how significant a rate cut might be. Powell kept that door open, adding that “the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”8

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, August 23, 2024
2Investing.com, August 23, 2024
3The Wall Street Journal, August 23, 2024
4The Wall Street Journal, August 19, 2024
5MarketWatch.com, August 22, 2024
6Reuters.com, August 22, 2024
7The Wall Street Journal, August 23, 2024
8The Wall Street Journal, August 23, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, August 19, 2024

Stocks Rally on New Economic Data and Fed Optimism:

Stocks notched more solid gains last week, driven by encouraging economic data and constructive comments from Fed officials about inflation and interest rates.
The S&P 500 Index rose 3.93%, while the Nasdaq Composite gained 5.29%. The Dow Jones Industrial Average lagged a bit, picking up 2.94%. The MSCI EAFE Index, which tracks developed overseas stock markets, powered ahead by 4.31%.1,2

Source: Charles Schwab

Upbeat Economic News

Three critical economic data points gave investors what they were looking for: wholesale inflation, consumer prices, and retail sales.
Both the Producer Price Index and the Consumer Price Index rose less than expected in July, reinforcing a picture of cooling inflation. The July retail sales report on Thursday was stronger than expected, which added more fuel to the week-long rally.3,4,5
Market action slowed down on the week’s final trading day, with positive consumer sentiment gains countered only by a drop in housing starts.
It was the S&P 500’s best weekly gain of the year so far and the best since November 2023. The gains helped erase losses from earlier in the month, when “carry trades” news from Japan unsettled investors.6,7

Sources: U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Charles Schwab

Double Assist

Last week’s market rally was bolstered by positive economic data and dovish comments from the Federal Reserve about cooling inflation and the likelihood of an interest rate cut in the coming months.
On Thursday, Atlanta Fed President Raphael Bostic said he had “a lot more confidence that inflation’s sustainably on its way to 2%,” citing steady drops in CPI, while St. Louis Fed President Alberto Musalem said, “the time may be nearing when an adjustment (to the Fed Funds Rate) may be appropriate.8

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, August 16, 2024
2Investing.com, August 16, 2024
3The Wall Street Journal, August 13, 2024
4The Wall Street Journal, August 14, 2024
5The Wall Street Journal, August 15, 2024
6The Wall Street Journal, August 16, 2024
7CNBC.com, August 16, 2024
8The Wall Street Journal, August 15, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, August 12, 2024

Stocks Bounce Back After Rough Start:

Stocks finished last week with modest losses, masking a volatile five-day trading period in which investors reacted to recession concerns before later dismissing the slowdown talk as speculation as the week progressed.
The Dow Jones Industrial Average slipped 0.60%, while the Standard & Poor’s 500 Index ended flat (-0.04%). The Nasdaq Composite dipped 0.18%. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 1.21%.1,2

Source: Bloomberg Finance, L.P.

Stocks Stage Comeback

Monday was the worst day for the S&P 500 and the Dow in nearly two years. As recession talk grew louder, investors took a “risk off” position.
On Monday, the Japanese market had its worst drop since 1987 as market participants unwound positions from a popular trading strategy called a “carry trade” amid a global sell-off in stock prices.3
But on Thursday, initial jobless claims fell less than expected—a positive sign for the labor markets— which quieted some of the recession talk. Also, as the week progressed, there was growing speculation that the July jobs report was more of an outlier than a lead indicator of a pending recession.
By Friday’s close, all three major averages had regained most of the week’s losses.4

Sources: U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Charles Schwab

Mortgage Update

Last Thursday, the average rate on a 30-year fixed mortgage dropped to 6.47 percent—a 15-month low. Many home buyers welcomed the news, and it appeared to help support Thursday’s rally.5
But the announcement left some wondering whether rates would continue to trend lower. Mortgage rates are tied to the interest rates set by the Federal Reserve. Some speculated the drop was due to market participants anticipating the Fed would adjust rates in September, which remains anything but certain.6

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, August 9, 2024
2Investing.com, August 9, 2024
3CNBC.com, August 5, 2024
4The Wall Street Journal, August 8, 2024
5The Wall Street Journal, August 8, 2024
6The Wall Street Journal, August 9, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Summer Break, Please! Unpacking Stock Market Events

By Gary Aiken | August 6, 2024

I’m sweating. What happened to summer break?! I deleted a last-minute slide from my Halftime Report presentation. The slide in question showed the incredible rise of technology stocks leading U.S. and global stock markets higher from January through June of last year, before a summer sector rotation. The first six months of this year repeated a significant rise in the prices of technology stocks as the Artificial Intelligence hardware and software race continued unabated.
I questioned on this slide whether we might see another summer sector rotation. No sooner than I had deleted it than the summer rotation I posited might begin, started. A combination of narrative and technical analysis seems to explain, in hindsight, the recent moves and maybe give us some idea of whether this is a regime change or just a temporary deviation from the prevailing trend. Let’s discuss briefly three of many reasonable explanations:

1. The Story of the Yen Carry Trade

Correlations between asset classes that don’t seem connected can sometimes imply something else is happening. The Japanese Yen and the S&P 500 (US Stock Market) were highly correlated this year. Hedge funds and institutional investors were using something called a carry trade – borrowing in one currency to buy assets in a different currency. As the funding currency (the Yen) depreciated, more dollar assets could be purchased. This trade would become more and more profitable the longer it went on.

A Positive Correlation Between the Yen and U.S. Stocks

Source: Bloomberg Finance, L.P.

However, the leverage in this trade would mean that its unwinding (forced selling and buying) could provoke very dramatic moves in both markets. In advance of its July meeting, the Bank of Japan started to intimate that it would raise interest rates for the first time since 2008. Contemporaneously, concerns emerged challenging the benefits of Artificial Intelligence applications and the pace of hardware infrastructure capital expenditures. The Yen started to appreciate in early July followed closely by selling in U.S. technology shares ahead of earnings.
Interestingly, on the last day of July, this correlation seemed to break down. While the Yen appreciated further on the day the Bank of Japan announced its policy decision, large-cap tech stocks abruptly stopped going down and rallied. The Yen carry trade unwinding was not over. The Yen has now appreciated to the point where almost all its losses against the dollar for 2024 have been erased. The physics of this trade requires an equal and opposite violent reaction on the other side of the ledger. This has come in the form of a broad-based sell off in global stocks.

2. The Story of the Inverse Relationship

The first quarter of 2024 was marked by increasing price-to-earnings (P/E) ratios and increasing yields. This positive correlation owed to a combination of a good economy, an inflation resurgence and healthy profit growth expectations enabled this positive correlation. The second quarter held a different and unfortunately familiar narrative. As they did for much of 2022, the prices of long duration assets (such as stocks and long-term bonds) reacted inversely to interest rates. Bond investors will remember the mathematical relationship that as yields go up, prices go down. The “inflation is back” narrative pushed rates higher in early April. When positive inflation data and shakier employment data came in, rates began to retreat. The rate cuts narrative became more mainstream again and stocks resumed their upward march.

Shifting Relationships in Stock and Bond Prices

Source: Bloomberg Finance L.P.

July proved a hyper microcosm of the second quarter. P/E ratios went on an inverse interest rate rollercoaster ride. Interest rates fell in the first two weeks, only to rise in the third and fall again into the Fed meeting at the end of the month. Tech-heavy stock index volatility ramped up in response, and small-cap stocks came to life. The Russell 2000 Index of small company stocks was up 10.2% in July, while the S&P 500 eked out a 1.2% gain that was in question until the final day of trading.
The Federal Reserve made no substantive changes to its statement on July 31, and Jerome Powell sheepishly provided answers at the press conference. The market is convinced that rate cuts are coming as early as September. Per our Halftime Report discussion on the same subject, we happen to agree that is likely.

3. Artificial Intelligence (AI) Capital Expenditures

A scary thought entered the minds of technology company analysts during July – or at least they started to talk openly about this fear. What if there’s no “killer app” for AI or the market begins to realize that it may take longer to realize the potential of AI? In that scenario, capital expenditures would shrink. Maybe the number of chips companies like Nvidia are baking into their projections makes no sense. Maybe there’s no real end user, and it’s the same ecosystem of companies selling to themselves. Maybe the hyperscalers (Microsoft, Amazon, Google, Meta) curb their spending to satisfy investors who don’t like the spending without an unambiguous revenue attached to it. These fears manifested in a sharp drop in the entire tech complex in July. The S&P Semiconductor Select Industry Index dropped 15% within a matter of days, while software indices fell 8%.

Projected Generative Artificial Intelligence Spending

Source: Sources: Bloomberg Finance, L.P., Bloomberg Intelligence, IDC, eMarketer, Statistica

The swiftness of this drop was abated by a simple reality. The number of applications that AI holds is still growing. It’s not just about a better chatbot. Uses extend from identifying cancer earlier to faster drug approvals in healthcare. It will lead to more efficient crop production to optimize pesticide delivery or integrating weather patterns into timely planting, watering, and harvesting. The fears were ultimately abated by Microsoft and Meta Platforms, which stated that they were not slowing down capital expenditures for the next two years. We are convinced that there’s nothing unreal about Artificial Intelligence.
We were wrong to pull our “summer sector rotation” slide. The violent downward moves in global stock markets are providing better prices for the stocks of highly profitable companies, including technology stocks. In the meantime, as in many times of market stress, long term investors must endure a painful continuation of July’s heat and market tumult. Instead of a fun summer break, we’re going to need a break from summer.

Author

Gary Aiken, Chief Investment Officer

Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection, as well as trading and investment operations.

Gary has over 21 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.

—

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure. The information in this article includes the opinions of the author and may not accurately reflect the opinions or values of Concord Wealth Partners or its affiliates.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM, or any non-investment related content, made reference to directly or indirectly in this newsletter) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM.

To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to their individual situation, he/she is encouraged to consult with the professional advisor of their choosing. CAM and CWP are neither law firms, nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.concordassetmgmt.com. Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, August 5, 2024

Investors Retreat Despite Fed Optimism:

Stocks experienced broad declines last week as investors looked past recent dovish comments from the Fed and focused on disappointing corporate reports and weaker-than-expected economic data.
The Dow Jones Industrial Average lost 2.20%, while the S&P 500 Index fell 2.06%. The Nasdaq Composite Index dropped 3.35%. By contrast, the MSCI EAFE Index, which tracks developed overseas stock markets, gained 0.19% for the week through Thursday’s close.1

Source: Charles Schwab & Co., Inc

Volatile Week of Trading

Stocks were under pressure early in the week as investors appeared to focus on the Fed’s July meeting, which ended on Wednesday. It was a big week for Q2 corporate reports, with five of the ten largest names in the S&P 500 by market capitalization reporting numbers, but investor attention was mainly on the outcome of the Fed’s meeting.2,3
Stocks rallied on Wednesday when Fed Chair Powell indicated a September interest rate cut was “on the table,” but selling picked up on Thursday as investors’ attention quickly shifted to disappointing corporate reports and weak economic data.4
Friday morning’s disappointing June jobs report raised even more concerns about the economy’s strength. The Nasdaq ended the week in correction territory, down more than 10% from its recent all-time high.5,6

Sources: U.S. Department of the Treasury, Charles Schwab & Co., Inc.

Economic Concerns

Fresh economic data suggested weakening manufacturing, construction, and employment outlooks. On Friday, the Labor Department’s July jobs report showed a sharper-than-expected job growth slowdown and an unemployment uptick to 4.3%—the highest rate in 2½ years.
At Wednesday’s Fed press conference, investors welcomed Powell’s unusually candid and upbeat comments. However, as the week progressed, investors started questioning whether the Fed was misreading the economy and moving too slowly in adjusting interest rates.7

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, August 2, 2024
2The Wall Street Journal, August 2, 2024
3S&P Global, July 31, 2024
4The Wall Street Journal, July 31, 2024
5The Wall Street Journal, August 1, 2024
6CNBC.com, August 2, 2024
7The Wall Street Journal, August 2, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, July 29, 2024

Stocks Shift Gears Amid Mixed Q2 Reports:

Markets experienced a volatile week with mixed results as disappointing corporate earnings reports left investors unsettled last week. This prompted some rotation away from leading sectors in favor of other emerging names.
The Dow Jones Industrial Average picked up 0.75%. Meanwhile, the S&P 500 Index declined 0.83%, and the Nasdaq Composite Index dropped 2.08%. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 1.49% for the week through Thursday’s close.1

Source: Charles Schwab & Co., Inc

Q2 Corporate Reports Start

Last week began with some positive momentum, but after Tuesday’s close, two influential tech companies reported disappointing Q2 numbers, which soured sentiment. On Wednesday, the S&P dropped 2%, and the Nasdaq fell more than 3%.2
Stocks attempted to rebound on Thursday on news that gross domestic product grew much faster than expected in Q2, but sellers swooped in near the close.3
Stocks rallied broadly on Friday after a positive inflation report. The personal consumption expenditures index, widely considered the Fed’s preferred inflation measure, showed only a slight uptick in June—in line with expectations.4

Source: Charles Schwab & Co., Inc

Watch the Rotation

July 26 saw the end of the third consecutive week in which the Dow led the other two averages and its fourth straight week of gains.
At the same time, the S&P and Nasdaq have been under pressure, with both posting losses for the second consecutive week.
So far in July, the Dow is up nearly 4%, the S&P is down slightly, and the Nasdaq is off by over 2%. That’s a marked change from earlier in the year when the Nasdaq led.5

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, July 26, 2024
2The Wall Street Journal, July 26, 2024
3The Wall Street Journal, July 25, 2024
4CNBC.com, July 26, 2024
5The Wall Street Journal, July 26, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.