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Market Recap

August 15, 2023

Historically August is the second worst month for market returns.1 So far, that reputation seems to be holding true. Fueling market declines were fresh inflation data and banking downgrades, with threats of more to come. 

July Consumer Price Index (CPI) numbers came in last week. This widely used measure of inflation showed a rate of 3.2%, which was slightly below market expectations. Core inflation (which excludes the volatile sectors of food and energy) rose 0.2%. While much progress has been made in lowering inflation, rates remain above the Federal Reserve’s (the Fed) long-term goal of 2%.

Moody’s Corporation, one of the nation’s top credit rating agencies, downgraded the ratings of 10 small and midsized U.S. banks last Monday.2 They also put some larger banks on notice that their rating may be impacted. This highlights the continued challenges the banking industry faces and serves as a reminder of the bank failures we saw earlier this year.

In positive news, as the earning’s season for Quarter 2 comes to a close, profits have surprised to the upside. Consumer sectors, construction, travel and streaming/gaming have shown particular strength. The VIX Index, which measures market volatility, has remained at historically low levels, signaling that the market is becoming more confident in a “soft landing”.3

As for the Fed’s plans, their next regularly scheduled meeting is in September. Continued sticky CPI numbers may push them to maintain their policy of interest rate hikes, which would also increase the odds of a recession.4 However, patience may be in order as interest rates continue to trend downward. Undoubtedly data over the next few weeks will be closely examined.

Reviewing returns for the first half of August, the markets all posted losses. As of market close on August 15th, the Dow was down 613 points (1.72%), the S&P 500 fell 151 points (3.29%) and the NASDAQ Composite Index (NASDAQ) dropped 715 points (4.98%). “The Best Months for Stock Market Gains” June 1, 2022 “Weekly Market Recap; Week ended August 11” August 14, 2023

3,4 “Weekly Market Recap; Week of August 14, 2023” August 14, 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.