August 9, 2023
This month marks the start of the third quarter, another interest rate increase by the Federal Reserve, and a continued recession watch. Despite this rate increase, the S&P 500 ended the month + 3.09% and the NASDAQ rose 3.85%. Fixed Income sectors, as tracked by the Bloomberg US Agg Total Return Value Unhedged USD, while not quite as strong, did continue the positive trend and squeaked out + .14%. Emerging markets and Gold both came in with strong performances on the month. Emerging Markets gained 4.61% as tracked by the MSCI Emerging Markets Index. And gold and silver as tracked by the PHLX Gold/Silver Sector Index (XAU) increased by 3.09%. For the first week of the month all these indices ticked slightly downward, but they quickly recovered.
On July 26, the Federal Reserve’s Federal Open Market Committee (FOMC) announced an increase to the Federal Funds rate of 25 basispoints.1 This rate, also known as the overnight rate or the target rate, now sits at 5.50%. This number, used for depository institutions’ overnight lending to one another, is at its highest level since 2001. The continued goal of these rate hikes is to decrease inflation and, as a result, help improve the overall economy. The Federal Reserve was followed by other entities including the European Central Bank2 and the majority of Gulf central banks3,who also raised rates by 25 basis points. They cited the high inflationary environment as their main reasoning. Additionally, many regional currencies governed by Gulf central banks are fixed by the U.S. Dollar and thus follow the Fed’s decisions.
As July came to an end, companies’ Q2 earning reports were released. Company earnings reflect the health of that specific company and can indicate the relative strength or weakness of the market as a whole. Predictions for second-quarter earnings were not all positive, with an overall consensus of a decline in earnings from the first quarter for companies listed in the S&P 500. However, the second-quarter results have been better than expected with the majority (around 80%) of companies reporting better than expected earnings.4
Moving the focus on to the individual consumer, it is important to note that for the first time in two years wages have increased more than consumer prices. The Consumer Price Index (CPI) grew by 3% 5 while wages increased by over 4%.6
The CPI, a good indicator of inflation, has decreased for the 11th consecutive month. Although this wage increase is not consistent amongst all sectors. Currently, wages for workers in the manufacturing and business-services are increasing at a faster rate than those in the tech industry. Additionally, in roles where it has been harder to find individuals to fill open positions, workers have more pricing power, but this is predicted to decrease as more people join the workforce and the supply of open positions tightens. The wages outpacing inflation can assist consumer participation in the market during periods of high inflation. Nonetheless, July was a positive month for markets that came with little volatility and the inflation rate is continuing to slow.
Portfolio Management Analyst
Published July 26, 2023; Accessed August 3, 2023
Published July 27, 2023; Accessed August 3, 2023
Published July 28, 2023; Accessed August 3, 2023
Published July 12, 2023; Accessed August 3, 2023
Published July 12, 2023; Accessed August 3, 2023
The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The Federal Open Market Committee is a committee of the Federal Reserve Board that meets regularly to set monetary policy, including the interest rates that are charged to banks.
The MSCI Emerging Markets Index consists of 23economies including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. The MSCI is a float-adjusted market capitalization index.
The PHLX Gold/Silver Sector Index (XAU) is a capitalization-weighted index composed of companies involved in the gold or silver mining industry.
The Bloomberg US Agg Total Return Value Unhedged USD Index is the most widely followed broad market U.S. bond index. It measures the investment grade, US dollar-denominated, fixed-rate taxable bond market.
The Consumer Price Index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households.
There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical measurements are one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity.
The Reports' commentary, analysis, opinions, advice, and recommendations represent those of Stadion Money Management and are subject to change at any time without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass Stadion reserves the right to modify its current investment strategies based on changing market dynamics or client needs. This document may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Stadion’s assumptions, expectations, objectives, and/or goals will be achieved. There is no guarantee of the future performance of any Stadion portfolio. This material is for information use only and should not be considered financial advice. The data presented has been gathered from sources believed to be reliable; however, their accuracy, completeness, or reliability cannot be guaranteed. We make no warranties and bear no liability for your use of this information.
Diversification does not eliminate the risk of experiencing investment losses.
Stadion Money Management, LLC("Stadion") is a registered investment adviser under the Investment Advisers Act of 1940. Registration does not imply a certain level of skill or training. More information about Stadion, including fees, can be found in Stadion's ADV Part2, which is available upon request.
Past Performance is no guarantee of future results. Investments are subject to risk, and any of Stadion's investment strategies may lose money.