Stocks Higher in 2024: Most major market indicies are continuing last year’s positive gains.
Inflation Moderating: The year-over-year increase in prices has ranged 3-4% every month for the past year, and further signs have emerged of the potential for softening prices.
Economy: The labor market has shown signs of normalizing, with fewer job openings and fewer employees voluntarily quiting their jobs in pursuit of better terms elsewhere. However, layoffs have been low and the unemployment rate remains at just 4.3%.
Interest Rates: Softening inflation and economic activity will likely give the US Federal Reserve cover to normalize (lower) interest rates later this year.
Market Rotation: The potential for lower interest rates and a US economy that avoids recession was very positive for asset classes like small cap and dividend stocks in July, though some of those gains have been given back in early August.
Volatility: In August, market volatility has increased significantly as concerns of a US recession has seemingly reentered the calculus of investors. A US recession is not our base case expectation at this point.