Weekly Market Insights – Monday, August 28, 2023

Stocks Retreat as Powell’s Hawkish Talk Rattles Markets:

Last week, stock markets remained volatile, influenced by unpredictable bond yields and more headline news. However, markets ended the week on a positive note after Fed Chair Jerome Powell’s remarks regarding the monetary outlook.
Over the last month, The Dow Jones Industrial Average returned -2.31%, while the S&P 500 returned –2.66%. The Nasdaq Composite Index returned –4.17%.

Stocks Manage Gains

Stocks rallied on Monday on upbeat sentiment over the earnings release from a mega-cap semiconductor company scheduled for mid-week, only to see that momentum fizzle the following day on weak retail earnings and a credit downgrade of a handful of banks.
Stocks resumed their rally on weak economic data, which fueled hopes for future Fed dovishness. They also rose on expectations that earnings from a leading AI chipmaker would validate the AI narrative that propelled markets in the second quarter. Despite a blowout earnings report, stocks turned lower as investor attention quickly switched to Fed Chair Powell’s presentation scheduled for Friday.
After some initial jitteriness, investors responded well to Powell’s comments, posting gains to close the week.

Powell Stands Firm

Powell spoke on Friday at the Fed’s annual economic symposium in Jackson Hole, asserting that, despite considerable progress, inflation remained too high and additional rate hikes may be on the horizon. He acknowledged that previous rate increases had not yet thoroughly worked their way through the system, so caution about further hikes was needed.
Investors reacted to Powell’s comments far better than in August 2022, when a hawkish presentation sent stocks lower. Powell also addressed a growing feeling among investors that the Fed may eventually raise its inflation target to 2.5-3.0%. Powell rejected this idea unambiguously, stating that the two percent target would remain the Fed’s inflation goal.

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management

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