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Market Recap

August 01, 2023

Markets spent the second half of July focused on interest rates and Federal Reserve (Fed) policy. The strength of the U.S. Economy also took center stage as companies began releasing their second-quarter earnings reports.

Last week the Fed concluded its July meeting and once again took action to increase interest rates by 0.25%. The rate hike was widely anticipated and markets were mostly unchanged after the announcement. The real question is how the Fed will proceed moving forward. Chairman Jerome Powell’s post-meeting comments gave few hints as he acknowledged recent progress on inflation and labor markets while underscoring the need to see continued evidence of cooling prices and softening wage growth. Much emphasis will be placed on the July and August Consumer Price Index (CPI) reports, which will likely determine whether further rate hikes are necessary.1

Data suggests that the U.S. Economy remains strong. In fact, Gross Domestic Product (GDP) picked up momentum in the second quarter to a rate of 2.4%, significantly above both economist expectations and the first quarter’s rate of 2.0%.2 A growing economy suggests that the risk of a recession, at least in 2023, is becoming less likely.

This Friday the U.S. Bureau of Labor Statistics will release its monthly report on the labor market. June’s report showed the smallest number of new jobs created since December 2020, surprising most economists. A cooling labor market would ease pressure on wage growth, which in turn should help continue to tame inflation.

Reviewing returns for the second half of July, the markets all continued positive momentum. As of market close on July 31st, the Dow jumped 1,051 points (3.04%), the S&P 500 rose 84 points (1.85%) and the NASDAQ Composite Index (NASDAQ) was up 232 points (1.65%). “Will the Federal Reserve hike rates again?” July 31, 2023  “Weekly Market Recap; Week ended July 28” July 31, 2023

The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Past performance is no guarantee of future results. No person or system can predict the market. There is no guarantee that any strategies discussed will result in a positive outcome. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal. S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index. Diversification does not guarantee a profit or protect against a loss.