We trust that you are doing well and enjoying the cooler temperatures as much as we are. The arrival of cooler weather always reminds us of the back-to-school season for many of our clients' households. Even if it has been many years since your household experienced this annual transition, I am sure you can still remember some of the adjustment. Channing has started his second year at Loudoun School of Advanced Studies, and we are currently establishing new morning routines and homework schedules. If you have students returning to school, we hope that the adjustments to their routines are going smoothly. Just as adapting to new routines can be challenging, the markets and investors are also navigating uncertain waters as the Federal Reserve is expected to lower interest rates in mid-September.
In August, the month started off with a highly disappointing employment report revealing a slowdown in July job growth beyond expectations, leading to the unemployment rate reaching its highest level since October 2021 at 4.3%. This news promptly caused the S&P 500 and other major indexes to drop by -5% in the first week of trading. Given the heightened sensitivity of markets and investors to new economic data, the markets quickly recovered as initial jobless claims decreased more than anticipated, Q2 GDP grew by 3% on an annualized basis, and retail sales increased by 1%. This increased sensitivity stems from the challenging task faced by the Federal Reserve in balancing inflation reduction without stalling economic growth. We are currently navigating uncharted waters, and if you are not accustomed to market volatility yet, you are likely to encounter numerous opportunities in the remaining months of the year as the Federal Reserve aims for a smooth economic transition.
The month concluded on a positive note in the markets, with the S&P 500 gaining +2.3% and the Nasdaq rebounding with a +1.1% increase after a challenging period. Out of 11 sectors, 9 ended on a positive note, with Consumer Staples leading the pack at +5.99%, while Technology underperformed and the Energy sector declined by -2.07%.
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