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Home / Blog / August 2024 Market Review
September 9, 2024
Fidelity Bank – Wealth Management
August 2024
William J. Fennie III, CFA
Despite an abrupt end to the dollar-yen carry trade in the beginning of August, equity and bond markets continued their climb. The VIX index, often known as the “fear gauge” jumped from 16 on July 31st to 38 on August 2nd as the trade quickly unwound. Globally, risk assets plummeted. The carry trade involves borrowing in a low-cost currency and investing in a higher yielding currency. If the borrowed currency appreciates or has an increase in rates, the trade can go south quickly for the investor. The Yen rallied more than 12% versus the USD from the middle of July to early August as the Bank of Japan increased their benchmark rate by 15 bps on July 31st.
Despite this volatility, the S&P 500 added 2.43% and the Bloomberg US Aggregate Bond Index rose 1.44%. Year-to-date the S&P 500 Index and Bloomberg US Aggregate Bond Index are up 19.53% and 3.07% respectively, driven by a favorable earnings season and likely rate cut in September. Jerome Powell and the Federal Reserve have boosted investor confidence with a statement many have been patiently waiting for “The time has come” referencing the likely rate cut in September which is predicted to be 25 – 50 bps. Since April, rates have declined at every tenor of the U.S. Treasury curve.
Equity
U.S. stocks advanced modestly in August with two sectors, Energy and Consumer Discretionary ending the month lower. Conversely, the Utilities sector was the top performer with Real Estate in a close second, with both up over 5% on the back of cooling inflation and declining rates. As expected, this trend broadly benefitted the value side of the market, with the Russell 1000 Growth index gaining 1.80% compared to a 3.07% gain for the Russell 1000 Value. Small Cap stocks lagged Large Caps with a relatively flat month. Year-to-date, Small Cap stocks are trailing Large Cap stocks by roughly 8.25%.
Despite uncertainties related to global economic conditions and geopolitical tensions, both international and emerging market equities posted a positive month. International equities, as measured by the MSCI EAFE Index, gained approximately 3.25% for the month, hoisting YTD returns for the index to 11.96%. Emerging market equities, tracked by the MSCI Emerging Markets Index, experienced a more tepid performance, rising around 1.61% for the month and 9.55% YTD.
Fixed Income
Bonds remained volatile throughout August, with the 2Y-10Y maturities uninventing for the first time since 2022. Bonds rounded out the month up 1.44% with investors speculating on when to expect the first rate cut and whether it will be 25 or 50 bps. As of 8/31/2024, traders were pricing in four 25 bps rate cuts by year end.
In continuation with the theme of much of 2024, corporate bonds led in August, returning 1.57% and outperforming YTD by 89bps. High Yield Bonds continued to perform well, gaining 1.63% and are now up 6.295% year-to-date due to higher carry and declining spreads.
Real Assets
Broad-basket commodities had an underwhelming August, inching higher by 0.05%. This increase came despite the large underperformance of the energy sector (-4.29%), due primarily to larger gas and oil inventories and the back of increased production. Conversely, gold continued to rally. Year-to-date, the spot price of gold is up 22%. This rally has caused the central bank’s 400 troy ounce gold bar benchmark to be worth more than $1,000,000 each for the first time in history.
August 2024 Market Review is intended solely to report on various investment views held by Fidelity Deposit & Discount Bank and is distributed for informational and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. Fidelity Deposit & Discount Bank does not have any obligation to provide revised opinions in the event of changed circumstances. All data is provided by Bloomberg Finance, LP and Morningstar Direct. We believe the information provided here is reliable but should not be assumed to be accurate or complete. Data, if not otherwise noted, is as of 8/31/2024. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security. Past performance is no guarantee of future results. All investment strategies and investments involve risk of loss and nothing within this report should be construed as a guarantee of any specific outcome or profit. Investors should make their own investment decisions based on their specific investment objectives and financial circumstances and are encouraged to seek professional advice before making any decisions. Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. The S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large‐cap segment of the U.S. equities market.
