Commentary

The Fed cut interest rates by 0.50% at its Federal Open Market Committee meeting last week. The market expected a cut but was unsure by how much. The debate between a 0.25% and a 0.50% cut dominated headlines over the past week, but it was mostly noise and likely won’t have a significant long-term impact. Now that the first cut is complete, the focus shifts to how much and how quickly the Fed will continue to cut rates.

After reaching all-time highs in mid-July, stocks have been under pressure for the last two weeks. For the month of July, the S&P 500 advanced 1.1%, its third consecutive monthly gain. The index 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 the first half of this year, started to decline in July as Nvidia, Microsoft, Google-parent Alphabet, and Facebook-parent Meta traded down after their strong starts to the year. In the bond market, Treasury yields fell. As of the last Friday’s close, the NASDAQ is now in a correction as the decline for this tech-heavy index from its recent all-time high has exceeded 10%.

After reaching all-time highs in mid-July, stocks have been under pressure for the last two weeks. For the month of July, the S&P 500 advanced 1.1%, its third consecutive monthly gain. The index 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 the first half of this year, started to decline in July as Nvidia, Microsoft, Google-parent Alphabet, and Facebook-parent Meta traded down after their strong starts to the year. In the bond market, Treasury yields fell. As of the last Friday’s close, the NASDAQ is now in a correction as the decline for this tech-heavy index from its recent all-time high has exceeded 10%.

The market continued a recent rotation trade last week, with the Russell 2000 gaining more than 2% while the “Magnificent 7” weighed down the Nasdaq and the S&P 500. The VIX Index remains well off its summer lows as the rotation leads to increased volatility. In the bond market, Treasury yields moved slightly higher, causing bonds to trade lower.

The S&P 500 Index, a well-known stock market index, tracks the performance of 500 of the largest U.S. companies. Many large-cap ETFs passively follow this broad index, and investors use it as a benchmark to gauge the relative performance of their portfolios. This year, however, a unique phenomenon is impacting the S&P 500. AI stocks are driving much of the index’s total return.

Nearly 11 months have passed since the Federal Reserve last raised interest rates. The pause in rate hikes follows a 17-month period where the central bank raised interest rates by 5.25%. This represented the fastest and most aggressive rate-hiking campaign in decades; however, the focus is shifting to interest rate cuts as the central bank prepares to make its next policy move.

Ten months have passed since the Federal Reserve last raised interest rates. The pause in rate hikes follows a 17-month period where the central bank raised interest rates by +5.00%. This represented the fastest and most aggressive rate-hiking campaign in decades, but the focus is shifting to interest rate cuts as the central bank prepares to make its next policy move.

Last week markets continued to pull back as the S&P 500 dropped to a two-month low. We are seeing stocks stressed due to a multi-faceted wave of challenges. The initial pullback in early April, predominantly driven by persistent inflation and higher interest rates, has catalyzed into a more extensive selloff. The S&P 500 and Nasdaq 100’s sharp decline of over 1% each on Monday of last week has sent a ripple effect across the globe. Asian benchmarks have retreated notably in Japan and Hong Kong, and European markets have not been spared the brunt.

Last week markets continued to pull back as the S&P 500 dropped to a two-month low. We are seeing stocks stressed due to a multi-faceted wave of challenges. The initial pullback in early April, predominantly driven by persistent inflation and higher interest rates, has catalyzed into a more extensive selloff. The S&P 500 and Nasdaq 100’s sharp decline of over 1% each on Monday of last week has sent a ripple effect across the globe. Asian benchmarks have retreated notably in Japan and Hong Kong, and European markets have not been spared the brunt.