That was an August for the record books! The U.S. equity markets, led by the red-hot technology sector, posted some very impressive numbers. The Dow, which only became positive year-to-date in late August, gained 7.92% for its best August since 1984. The S&P 500 and NASDAQ set new all-time highs in August, gaining 7.19% and 9.70%, respectively. For the S&P 500, it was its best August performance since 1986, and since 2000 for the NASDAQ.
The foreign markets also posted solid gains, albeit not keeping pace with the U.S. The EAFE Index, measuring mostly large capitalization stocks from developed countries, gained 5.14% for the month, while the emerging markets gained 2.24%.
The U.S. bond market, measured by the Bloomberg Barclays Capital Bond Index, is largely negatively correlated to the U.S. stock market and as such lost 0.81% for August.
What about September?
Historically, September is the worst performing month of the year. Coming off an impressive rally in August, U.S. stocks hit serious turbulence September 3 and 4 with a broad-based rout (using the S&P 500) of about 5%. Until then, some were describing the massive rally in the tech sector as a “melt up.” During this recent decline, technology certainly had a “melt down,” leading the market lower. Some pointed to simple profit taking as the catalyst for the decline, while others noted the comments made by Dr. Fauci made early on September 3 about the time frame for a usable COVID vaccine.
Let’s put all of this in perspective. This decline brought the markets back to their August 19 level – just two weeks ago. So, while these two days got everyone’s attention, the markets are still within a stone’s throw of their all-time highs. And it was only last June when the markets experienced this type of rapid sell-off, and the markets jumped right back in rally mode soon thereafter.
This is not to say that we, as investors, will not face additional volatility going forward. We most certainly will. But this is what the markets do and volatility should come as no surprise (although it may not feel good). Based on its 200-day moving average, the S&P 500 could decline to just below 3,100 and still remain in what is considered an uptrend going forward.
Your HFG advisory team
We are supported by a depth of knowledge and experience from Commonwealth Financial Network’s Research department, making up your HFG advisory team. These are challenging times and please know we are always available to you to have conversations about where you are and where we are going.
Stay safe and healthy.