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Sep 02, 2022

August 2022

Provided by YCharts

The “summer rally” fizzled out in August
 as most equities drifted lower. The Dow Jones Industrial Average ended August down 3.7%, the S&P 500 fell 4.1%, and the NASDAQ was off 4.5%. Remarks made in late August by Federal Reserve Chair Jerome Powell suggested the central bank will continue hiking interest rates to combat inflation and stabilize prices. Jay-Pow’s address soured the so-called “summer rally” that started in July following a Q2 earnings season that broadly beat Wall Street expectations. Year-to-date, the Dow is off 12.0%, the S&P 500 is 16.1% lower, and the NASDAQ is firmly back in bear market territory, down 24.1%.

Only two sectors were positive in August. Energy finished up 2.7% even as crude oil and retail gas prices fell, while Utilities inched 0.5% higher. Cyclical sectors were hurt the most—Communication Services, Consumer Discretionary, Real Estate, and Technology all slipped between 3.5% and 6.2%. Interestingly, Health Care was second-worst on the month, despite being a historically rate-proof sector.

Further signs of decay emerged in the housing market as new and existing home sales both declined, and for the sixth time in the last seven months. The latest data from July shows US New Single-Family Home Sales tumbled 12.7%, while Existing Home Sales fell nearly 6%. On the inflation front, July’s inflation rate fell to 8.52%, while core inflation stayed about flat month-over-month at 5.9%. Finally, the average US gas price hasn’t started with a “$3” since February 28th—that changed in August, as gas prices clocked in at $3.94 by month’s end.

The 1-Year T-Bill sported the second-highest rate among US Treasuries as of August 31st. Only the 20-Year Bond’s 3.53% yield was higher than the 1-Year’s 3.50%. Seven of the nine US treasury instruments closed out August with rates above 3%, and the 1-Month T-Bill neared its relative high of 2.51% set in March 2019. In spreads, the widely-followed 10-2 Year Spread was inverted by 30 basis points, while the 10 Year-3 Month Spread continues to float just above negative territory.

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