My recent commentary in July was focused on the roller coaster ride that we have experienced in the U.S. stock market this year. So far in 2014, every pullback in stock prices has been met with strong buying that has taken the S&P 500 Index to new all-time highs. The recent pullback that we witnessed in late July and early August is certainly no different.
From the intraday high on July 24th (1,991) to the most recent intraday low on August 7th (1,904), the S&P 500 Index lost around 87 points. Over that two week period of time, the S&P 500 Index lost roughly 4.37%.
Since the sharp 4.37% decline in late July, the S&P 500 Index has rallied above the July 24th all-time high as prices continued to appreciate throughout the month of August. August 26th set the new all-time intraday high for the S&P 500 Index at 2,005 with the monthly S&P 500 Index closing coming in around 2,003. Year-to-date, the S&P 500 Index is up 8.39% or about 155 points through the end of August. Several strong data points in August, which pushed stock market prices higher are shown below:
- The Chicago PMI (Purchasing Managers Index) jumped to 64.3 from 52.6 indicating expansion.
- The Bureau of Economic Analysis (BEA) released its revised second quarter estimate of the gross domestic product (GDP) for the U.S. economy. The BEA’s analysis projected an increase in GDP from 4.0% from the first estimate; to 4.2% in the revision for GDP growth in the 2nd quarter.
- The most recent jobs report for the final week of August came in at 298,000 initial unemployment claims compared to an estimate of 300,000. These levels were some of the lowest in more than a decade as U.S. job creation is improving to near record levels.
The August data continues to indicate an economic recovery is underway. U.S. equity markets are showing solid gains thus far in 2014, however the roller coaster ride may become more intense in the coming months.
Summer is coming to an end and the kids have headed back to school. The excitement around the college and professional football seasons beginning is becoming almost palpable and I am excited to watch Rams football again! However, the beginning of football season typically represents a very active seasonal time frame for U.S. financial markets as trading volumes will begin to pick up.
Increased trading volume and strong seasonality will help to identify emerging trends in financial markets domestically. Not only the strength of the underlying trends, but the economic and geopolitical landscape will become more transparent in time. Ultimately, the strength of a variety of trends will help shape my year-end forecast.
My team and I will continue to rebalance our clients’ portfolios while remaining focused on alternative investments. The next few months will demonstrate the strength of the economy and the state of our country. Geopolitical tension exists in Eastern Europe and the Middle East. In addition to geopolitical tension, we will also have the Mid-Term Elections in just a few short months. Time will tell if the roller coaster will keep climbing higher unabated, but we will do our best to help make the ride as comfortable as possible for our clients.
Until next time, stay healthy, wealthy, and wise, and certainly . . . stay tuned.