After a July with no daily moves of 1% or greater, volatility returned to the markets on Friday, 1 August with the S&P 500 down over 1%, closing the week down at 6,238. So how did we get there? Last weekend Trump announced that the U.S. had reached a tariff agreement with the European Union, and the markets reacted positively with the S&P 500 hitting a new record high on Monday. On Tuesday the major indices were weighed down as progress of China trade talks became shaky, and with that the S&P 500s streak of six consecutive days of new highs came to an end. On Wednesday a stronger-than-expected reading of gross domestic product was quickly overcome when the Fed held rates steady, with the S&P 500 falling slightly. After the markets closed, Microsoft and Meta reported better-than-expected quarterly earnings, and both rose in premarket trading. At Thursdays open the S&P 500 gapped up, making a new intraday record high of 6,427. However, this news did not translate to the broader markets with the S&P 500 falling nearly 90 points from that intraday record, closing at 6,339. However, we still had hope with Amazon and Apple reporting earnings after the bell. And then August rolled in with the bearish trifecta. First that Amazon and Apple hope quickly faded as their results did not meet expectations. Second, the July jobs report showed nonfarm payrolls expanding by 73,000, well under the 100,000 estimate. And then came the revisions with June job growth totaling just 14,000, down from 147,000, while the May count came down to 19,000 from 125,000. And third, modified reciprocal tariffs on dozens of countries was announced, with updated duties ranging from 10% to 41%. By Fridays close the S&P 500 shed 1.60% to post its worst day since 21 May, and worst weekly performance since 23 May. From a technical perspective some of this weeks bullish drivers are now behind us. The next Fed meeting is 17 September, so dont expect any rate relief until then. Six of the Magnificent Seven companies have reported earnings with mixed results, and we dont get Nvidia results until 27 August. The only plus is that maybe we are seeing the completion of tariff negotiations in the next couple of weeks. But lets look at the S&P 500 over the last four months. On 7 April it hit an intraday low of 4,385, and it scored monthly gains in May, June and July. And on 31 July, it hit an intraday record high of 6,427 for a run of nearly 50%. And lastly, since 1957, the August S&P 500 has returned an average of 0.1% and ranks 10th of the 12 months. As such, some consideration should be given to become more cautious. For TSP TIPS we have seen both a decrease in Composite Scores and Performance Rankings in all three equity funds (C/S/I) this week. As such we are recommending new investment mixes in all three TSP TIPS models, raising our cash allocations.
After a July with no daily moves of 1% or greater, volatility returned to the markets on Friday, 1 August with the S&P 500 down over 1%, closing the week down at 6,238. So how did we get there? Last weekend Trump announced that the U.S. had reached a tariff agreement with the European Union, and the markets reacted positively with the S&P 500 hitting a new record high on Monday. On Tuesday the major indices were weighed down as progress of China trade talks became shaky, and with that the S&P 500s streak of six consecutive days of new highs came to an end. On Wednesday a stronger-than-expected reading of gross domestic product was quickly overcome when the Fed held rates steady, with the S&P 500 falling slightly. After the markets closed, Microsoft and Meta reported better-than-expected quarterly earnings, and both rose in premarket trading. At Thursdays open the S&P 500 gapped up, making a new intraday record high of 6,427. However, this news did not translate to the broader markets with the S&P 500 falling nearly 90 points from that intraday record, closing at 6,339. However, we still had hope with Amazon and Apple reporting earnings after the bell. And then August rolled in with the bearish trifecta. First that Amazon and Apple hope quickly faded as their results did not meet expectations. Second, the July jobs report showed nonfarm payrolls expanding by 73,000, well under the 100,000 estimate. And then came the revisions with June job growth totaling just 14,000, down from 147,000, while the May count came down to 19,000 from 125,000. And third, modified reciprocal tariffs on dozens of countries was announced, with updated duties ranging from 10% to 41%. By Fridays close the S&P 500 shed 1.60% to post its worst day since 21 May, and worst weekly performance since 23 May. From a technical perspective some of this weeks bullish drivers are now behind us. The next Fed meeting is 17 September, so dont expect any rate relief until then. Six of the Magnificent Seven companies have reported earnings with mixed results, and we dont get Nvidia results until 27 August. The only plus is that maybe we are seeing the completion of tariff negotiations in the next couple of weeks. But lets look at the S&P 500 over the last four months. On 7 April it hit an intraday low of 4,385, and it scored monthly gains in May, June and July. And on 31 July, it hit an intraday record high of 6,427 for a run of nearly 50%. And lastly, since 1957, the August S&P 500 has returned an average of 0.1% and ranks 10th of the 12 months. As such, some consideration should be given to become more cautious. For TSP TIPS we have seen both a decrease in Composite Scores and Performance Rankings in all three equity funds (C/S/I) this week. As such we are recommending new investment mixes in all three TSP TIPS models, raising our cash allocations.