This week marked the end of a bullish July, and also the start of a bearish August as the S&P 500 was down over 2% for the week, closing at 5,346 on Friday. Monday was flat for the S&P 500, and it fell off slightly on Tuesday. On Wednesday we closed out July and the S&P 500 had a daily gain of over 1% after the Fed gave a strong hint that a rate cut was coming at its next meeting on 18 September. It should also be noted that on 16 July the S&P 500 set a new all-time high of 5,667. August rolled in on Thursday and within 15 minutes the S&P 500 made an intraweek high. However, the markets quickly reversed course as ISM data showed the US manufacturing sector sank further into contraction territory, jobless claims rose to an 11-month high, and June construction spending unexpectedly declined. It was not a good way to start August with the S&P 500 having a greater than 1% loss. Before Fridays open the Labor Department reported that nonfarm payrolls grew by just 114,000, while the unemployment rate increased to 4.3%, the highest since October 2021. As such, the S&P 500 gapped down at the open and made it back-to-back daily losses of over 1%. It should also be noted that during Fridays sell-off, the CBOE Volatility Index leapt as high as 29.66, marking the highest level for Wall Streets fear gauge since 15 March 2023. Friday also saw the 10-year Treasury yield fall below 4% to its lowest since December, and as interest rates fall, bond prices increase. From a technical perspective we saw the S&P 500 crossing below its 50 day Moving Average and Performance Ranking decrease. The Sahm Rule was also triggered on Friday, which states that when the unemployment rate over a three-month period averages 0.5% above the 12-month low, the economy is in recession. That 4.3% rise in the July unemployment rate brought the three-month average to more than 4.1%, compared to the 3.5% 12-month low. The major concern for next week will be the Mega Cap Tech sell-off, and whether it will continue as most of the companies have reported earnings over the last two weeks. To illustrate, on 20 June NVIDIA (NVDA) closed at $140.76, and on Friday it closed at $107.27. On this past Wednesday Intel (INTC) closed at $30.87, while on Friday it closed at $21.48. For TSP TIPS the Composite Scores and Performance Rankings of all three equity funds (C/S/I) have decreased this week. At the other end of the spectrum, the F fund has a bullish composite score as it made four new 52 week highs on Tuesday through Friday. Closing Friday at $19.8557, it is still shy of its 6 August 2020 all-time high of $21.2672. As such we recommend the following new investment mix.
This week marked the end of a bullish July, and also the start of a bearish August as the S&P 500 was down over 2% for the week, closing at 5,346 on Friday. Monday was flat for the S&P 500, and it fell off slightly on Tuesday. On Wednesday we closed out July and the S&P 500 had a daily gain of over 1% after the Fed gave a strong hint that a rate cut was coming at its next meeting on 18 September. It should also be noted that on 16 July the S&P 500 set a new all-time high of 5,667. August rolled in on Thursday and within 15 minutes the S&P 500 made an intraweek high. However, the markets quickly reversed course as ISM data showed the US manufacturing sector sank further into contraction territory, jobless claims rose to an 11-month high, and June construction spending unexpectedly declined. It was not a good way to start August with the S&P 500 having a greater than 1% loss. Before Fridays open the Labor Department reported that nonfarm payrolls grew by just 114,000, while the unemployment rate increased to 4.3%, the highest since October 2021. As such, the S&P 500 gapped down at the open and made it back-to-back daily losses of over 1%. It should also be noted that during Fridays sell-off, the CBOE Volatility Index leapt as high as 29.66, marking the highest level for Wall Streets fear gauge since 15 March 2023. Friday also saw the 10-year Treasury yield fall below 4% to its lowest since December, and as interest rates fall, bond prices increase. From a technical perspective we saw the S&P 500 crossing below its 50 day Moving Average and Performance Ranking decrease. The Sahm Rule was also triggered on Friday, which states that when the unemployment rate over a three-month period averages 0.5% above the 12-month low, the economy is in recession. That 4.3% rise in the July unemployment rate brought the three-month average to more than 4.1%, compared to the 3.5% 12-month low. The major concern for next week will be the Mega Cap Tech sell-off, and whether it will continue as most of the companies have reported earnings over the last two weeks. To illustrate, on 20 June NVIDIA (NVDA) closed at $140.76, and on Friday it closed at $107.27. On this past Wednesday Intel (INTC) closed at $30.87, while on Friday it closed at $21.48. For TSP TIPS the Composite Scores and Performance Rankings of all three equity funds (C/S/I) have decreased this week. At the other end of the spectrum, the F fund has a bullish composite score as it made four new 52 week highs on Tuesday through Friday. Closing Friday at $19.8557, it is still shy of its 6 August 2020 all-time high of $21.2672. As such we recommend the following new investment mix.