August 2024 - Market Commentary

Monthly Market Summary

• The S&P 500 Index returned +1.2% in July, underperforming the Russell 2000 Index’s +10.3% return. Ten of the eleven S&P 500 sectors traded higher, led by Real Estate, Utilities, and Financials. Technology was the only sector to trade lower, reversing a portion of its rise in the first half of 2024.
• Corporate investment-grade bonds produced a +2.6% total return as Treasury yields declined. Corporate high-yield bonds gained +2.3% as credit spreads tightened. 
• International stock performance was mixed. The MSCI EAFE developed market stock index returned +2.6%, while the MSCI Emerging Market Index returned +0.8%.

Stocks & Bonds End the Month Slightly Higher

The S&P 500 ended July slightly higher, its third consecutive monthly gain. The index initially traded higher and briefly surpassed 5,600 for the first time before it traded lower in late July and gave back some of the gains. The tech-heavy Nasdaq 100, which led markets higher in 1H 2024, returned -1.7% as Nvidia, Microsoft, Google, and Facebook-parent Meta traded down after their strong 2024 start. In contrast, the Russell 2000 Index of small-cap stocks posted its strongest monthly return since December 2023. In the bond market, Treasury yields fell. The U.S. Bond Aggregate Index, which tracks a wide array of investment-grade bonds, traded higher for a third consecutive month, the longest win streak since 2021. Despite the muted headline returns, the stock market experienced a seismic shift as expectations increased for a September interest rate cut.

Investors Rotate into Small Cap Stocks as Rate Cuts Come into View

Large-cap stocks dominated in the first half of 2024, with the S&P 500 outperforming the Russell 2000 by over +13%. The S&P 500’s strong first half return was influenced by two factors: (1) investor concerns about the impact of high interest rates on smaller companies and (2) large-cap stock indices’ exposure to the artificial intelligence (AI) industry. This combination of interest rate concerns and AI dominance led to crowded positioning as investors focused on a narrow group of large-cap stocks.

The investment narrative changed in July after the CPI inflation report showed continued progress. The better-than-expected inflation report raised expectations for a September interest rate cut, leading to a significant rotation within equity markets. Investors moved from large-cap stocks into small caps, with the Russell 2000 outperforming the S&P 500 by over +9%. This year’s high-flying mega-caps bore the brunt of the large-cap sell-off as investors questioned when billions of dollars in AI investments will pay off. As investors rotated, the year-to-date return gap between the Nasdaq 100 and Russell 2000 shrank from nearly +16% at the end of June to now only +3.3%. It’s uncommon for the stock market to experience such a large shift in such a short amount of time. There could be some residual volatility in the near term as markets weigh the prospects for corporate earnings and interest rate cuts, but the market isn’t expecting a repeat in August.

Source: Market Desk

SEC Registration does not imply a certain level of skill or training.

The information provided herein is for general informational purposes only and is intended for your personal use and should not be circulated to any other person without our permission and any use, distribution, or duplication by anyone other than the recipient is prohibited. No portion of this commentary is to be construed as an offer or solicitation to buy or sell a security, or the rendering of personalized investment advice. The views and strategies described herein may not be suitable for all investors and are subject to investment risks. The content is developed from sources believed to be providing accurate information. The information contained herein should not be relied upon in isolation for the purpose of making any investment decision. 

We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation and conducted reasonable due diligence to ensure the third parties’ performance is not materially inflated or incorrect; however, we do not represent or warrant its accuracy, reliability, or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. We do not make any representation or warranty regarding any computations, graphs, tables, diagrams, or commentary in this material which are provided for illustration/ reference purposes only. These views, opinions, estimates, and strategies expressed in it constitute our judgement based on current market conditions and are subject to change without notice. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. 

Data which may be found in this document is based on our research and should not be taken as a forecast or an estimate of likely future returns. Any reference to a market index is included for illustrative purposes only, as an index is not a security in which an investment can be made.   

Investments involve some sort of risk including potential loss of principal; diversification alone cannot guarantee against loss. Any projected results and risks are based solely on hypothetical examples depicted. Forward-looking statements should not be considered guarantees or predictions of future events. More complete information is available, including product profiles, which discuss risks, benefits, liquidity, and other matters of interest. The value of any investment may fluctuate as a result of market changes. Past performance is no guarantee of future results, and there can be no assurance the investment strategies discussed herein will prove profitable. 

All opinions, estimates, investment strategies and views expressed in this document are subject to change without notice information. The recommendations made for your customized portfolio may differ from any asset allocation or strategies outlined in this document. Benchmark Financial does not guarantee the future performance of any portfolio, guarantee any specific level of performance, or guarantee any strategy or overall management will be successful or that the client’s investment objectives will be met.

Benchmark Financial is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. Investment Advisory Services offered through Benchmark Financial Wealth Advisors LLC, an SEC Registered Investment Advisor. Insurance services offered through Benchmark Financial Insurance Advisors LLC. The Benchmark Financial Wealth Advisors ADV Form 2A, 2B & Form CRS, which describe the services offered, fees charged and any conflicts of interest, are available upon request or online at www.bfllc.com. Additional information about Benchmark Financial and our advisors is also available online at https://adviserinfo.sec.gov/firm/summary/287966.