Market Update

This past week, the financial markets experienced significant volatility, yet the S&P 500 remains resilient so far, posting a year-to-date gain of over 12% as of August 2, 2024. Several factors contributed to the market fluctuations, and we want to provide you with insights into recent developments and our approach moving forward

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Federal Reserve and Interest Rate Outlook

The Federal Reserve opted to maintain its current interest rate this week but indicated that rate cuts are a possibility in the near future. The market is already anticipating a likely rate cut in September, with the bond market reflecting these expectations.  How much of these potential interest rate reductions are already factored into the stock market's current pricing?

Earnings Reports and Economic Indicators

This week also saw a large number of releases of second-quarter earnings reports from major companies, offering a glimpse into their performance and outlook. While some companies gave slower growth guidance, others, such as Meta, exceeded expectations and experienced stock price gains. On the other hand, Intel faced a significant drop in stock value, marking one of the largest single-day declines in the company's history.

We closely monitor these earnings reports and economic data, recognizing that they can provide valuable insights into broader market trends. Despite the recent volatility, our investment strategy remains focused on long-term goals rather than reacting to short-term market fluctuations.

Economic Data and Market Reactions

Several key economic indicators influenced market sentiment this past week. The ISM Manufacturing Index, released on August 1st, indicated a slowdown in manufacturing activity, which is an economic indicator. Additionally, the unemployment rate rose by 0.2% in July, reaching 4.3%. This was a large tick up and something to watch and consider, but still low historically.

However, these indicators suggest a slowing economy and the impact of inflation on consumers. As fiduciaries, we are committed to carefully evaluating these developments and adjusting our strategies accordingly.

Capstone's Approach and Strategy

At Capstone, we prioritize your financial well-being and tailor our strategies to your specific needs. For clients with cash requirements in the next year or two, we recommend holding cash or cash equivalents, such as CDs and treasuries, to ensure liquidity and stability, regardless of the market or economy.

In response to the current environment, we have increased exposure to utilities, selective real estate, and mid/small-sized U.S. companies. Historically, these sectors perform well when interest rates decline. Utility companies, in particular, tend to be more stable during market volatility as they provide essential services to consumers.

While market pullbacks, like the one in October 2023, can be unsettling, we view them as part of the market's natural cycle. We remain focused on long-term investment goals and make informed decisions based on thorough analysis.

We Are Here for You

As your trusted fiduciaries, we are committed to guiding you through these uncertain times. If you have any questions, concerns, or would like to review your portfolio's alignment with the current market outlook, please do not hesitate to reach out to your advisor.

Thank you for your continued trust in Capstone Investment Financial Group. We are dedicated to helping you achieve your financial goals and navigate the evolving market landscape.

*SP 500 is an index that can not be invested in directly