🦉 This Week in the Markets

In 4 minutes

Author

Al Atencio
September 06, 2024 • Estimated Reading Time: 4 minutes

Catch-up with what’s happening in the markets in 4 minutes.

I’m reading and scrolling, and bringing you what’s relevant, so you don’t have to.

End of Week Markets Update

1) Across various asset classes year-to-date, it’s been a very solid year for the investor class!

You might look at these double-digit returns and think, "Uh-oh, the market's getting too hot." But sitting on the sidelines is the last thing you want to do in a bull market.

In fact, if you check out the S&P 500, you'll see that this year's returns are pretty much spot-on with what you'd expect in a typical bull market year.

Looking at almost 100 years of S&P 500 data:

When the index has a positive return in a calendar year, the average gain is around 21%. On the flip side, in years when it’s negative, the average drop is about 13%.

2) One of the most closely watched financial market trends over the past two years has finally come to an end: the Treasury yield curve has disinverted.

Just to recap, an inverted yield curve happens when short-term U.S. Treasury bonds pay higher interest rates than long-term bonds.

This is unusual, because normally longer-term bonds offer higher yields to reward you for tying up your money for a longer time.

Historically, an inverted yield curve has been a reliable sign that a recession might be on the way.

But so far, in this strange post-pandemic economic landscape, the signal has failed (so far).

3) Bond market pricing is indicating expectations for a big drop in interest rates from 5.25%-5.5% today to 3.55% by the end of 2025.

That’s a lot of cuts!

Lower interest rates are good for equities and bonds. BUT NOT, if the Fed is cutting rates aggressively into a developing recession.

4) Existing home sales in the U.S. are at decade lows.

It's no surprise, given the terrible housing affordability caused by a combination of high interest rates and elevated home prices. Also, people who locked in low mortgage rates have been frozen in place with little incentives to move.

5) For the recession doomers, here’s an interesting economic data point:

Charts

With existing homes sales are on ice, home builders are having a party.

It was the highest monthly close for Home Construction stocks in history.

Another contra-recession indicator:

This year was the busiest August for air travel on record—over 5% higher than 2023.

  • August 2024: 79.5 million

  • August 2023: 75.4 million

  • August 2019: 73.1 million

And finally, some parting wisdom:

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