August 2023
by Clare Market Investments on Aug 4, 2023
Monthly Market Summary
The S&P 500 Index gained +3.3% in July but underperformed the Russell 2000 Index’s +6.1% increase. All eleven S&P 500 sectors traded higher, led by the Energy, Communication Service, and Financial sectors.
Corporate investment grade bonds produced a +0.1% total return in July, underperforming corporate high yield bonds’ +1.1% total return.
The MSCI EAFE Index of developed market stocks rose by +2.7%, underperforming the MSCI Emerging Market Index’s +6.0% return.
S&P 500 Trades Toward its All-Time Closing High from January 2022
The S&P 500 extended its winning streak to five months in July, bringing its year-to-date total return to 20.5%. The S&P 500 has now recovered most of its losses from 2022 and is currently trading less than 5% below its all-time closing high set in January 2022. On a related note, the Dow Jones Industrial Average, which tracks 30 prominent U.S. companies, recorded a 13-day winning streak in July – its longest since 1987. Like the S&P 500, the Dow Jones is also trading less than 5% below its all-time closing high, set back in January 2022.
What is fueling the stock market’s gains? In one word: expectations. The U.S. economy has defied expectations for a recession, with job growth, consumer spending, and corporate earnings remaining resilient despite higher interest rates. The recent downward trend in inflation data is adding to the optimism, with investors hopeful that the Federal Reserve can achieve a soft landing or potentially avoid a recession altogether. Despite the favorable trends in the first half of 2023, there is concern that the Fed may need to keep raising interest rates due to recent increases in home prices and commodity prices.
Gasoline Prices Rise to a 3-Month High, Prompting Inflation Concerns
Gasoline prices are rising again, sparking concerns among consumers and central bankers alike. According to AAA, the national average price for a gallon of regular gasoline reached a three-month high of $3.75 on July 31st. The recent rise in oil prices is driving this increase, with West Texas Intermediate crude hitting $80 per barrel. Other contributing factors include supply cuts by OPEC and Russia, extreme heat disruptions at refineries that are leading to lower gasoline inventories, and overall optimism about the global economy and demand for oil. While current prices are still below the level of $4.22 per gallon one year ago, the rise in fuel costs could slow the Fed's progress in curbing inflation and may even require additional interest rate hikes by the central bank. Markets will pay close attention to the energy and overall commodity markets in the upcoming months as the situation unfolds.
IMPORTANT DISCLOSURES
Clare Market Investments, LLC is a Registered Investment Advisor. This material is for informational purposes only. It is not intended as and should not be used to provide investment advice and is not an offer to sell a security or a recommendation to buy a security. The information is derived from sources believed to be reliable and accurate as of the date of this report, but Clare Market has not audited this information to validate accuracy. Further, information may be at a point in time and subject to change. This summary is based exclusively on an analysis of general market conditions and does not speak to the suitability of any specific proposed securities transaction or investment strategy. Judgement or recommendations found in this report may differ materially from what may be presented in a long-term investment plan and are subject to change at any time. This report’s authors will not advise you as to any changes in figures or views found in this report. Investors should consult with their investment advisor to determine the appropriate investment strategy and investment vehicle. Investment decisions should be made based on the investor’s specific financial needs and objectives, goals, time horizon and risk tolerance. Except for the historical information contained in this report, certain matters are forward-looking statements or projections that are dependent upon risks and uncertainties, including but not limited to such factors and considerations such as general market volatility, global economic risk, geopolitical risk, currency risk and other country-specific factors, fiscal and monetary policy, the level of interest rates, security-specific risks, and historical market segment or sector performance relationships as they relate to the business and economic cycle. See claremarket.com for additional information and disclosures. © 2023 Clare Market Investments, LLC. All Rights Reserved.
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- Peter Lynch