Weekly Market Roundup
Markets spent much of the week in a quiet, low-volume holding pattern ahead of Friday's August jobs report and the three-day Labor Day weekend, with light, summer-style trading volumes persisting even as major indices notched modest gains. The S&P 500 rose +0.46% for the week, the Nasdaq added +0.54%, the Dow Jones gained +0.22%, and the Russell 2000 outperformed with a +0.68% advance. Much of the week's strength came Thursday, aided by a wave of pre-payrolls flow-driven buying, before Friday's jobs data prompted a partial reversal: August nonfarm payrolls came in at 162,000, nearly triple the 55,000 consensus estimate, while the unemployment rate held steady at 4.1%. The much-stronger-than-expected print put September rate-hike odds back on the table, and equities pulled back modestly into the close, with trading volume on the S&P 500 SPDR (SPY) coming in well below its three-month average on Friday, consistent with the subdued, wait-and-see tone that defined the week overall.
Treasury yields backed up on the hot jobs print, with the 2-year, 10-year, and 30-year all ending the period a touch higher at 4.34%, 4.77%, and 5.25%, respectively. That move weighed modestly on fixed income, with the Bloomberg US Aggregate down -0.09% on the week and now slightly negative for the year at -0.40%. The VIX ticked up slightly to close at 14.53, though volatility remained contained within its recent calm range. The U.S. Dollar Index saw a sharp single-day drop on Thursday and remains in a broader downtrend, while continued strength in oil prices added to the week's inflation-watching narrative.
International equities held up well, with the MSCI ACWI Ex-USA index up +0.37% on the week and still one of the stronger year-to-date performers at +17.82%, while emerging markets outpaced developed peers on the week. Healthcare also continued to be a source of relative strength, a continuation of a trend that has now persisted for several months rather than a new development, consistent with what has been one of our stronger long-standing sector positions this year.
Markets are closed Monday, September 7 in observance of Labor Day, compressing an otherwise data-heavy week into four sessions. ADP's private payrolls estimate and consumer credit data arrive Tuesday, followed by a 10-year Treasury note auction Wednesday. Thursday brings the Producer Price Index, weekly jobless claims, and existing home sales data, before the week culminates Friday with the Consumer Price Index (CPI) — arguably the week's most important release given the Fed's stated focus on inflation following last week's much-stronger-than-expected jobs report. A hot CPI print would likely reinforce September rate-hike expectations further, while a cooler read could ease some of that pressure back off.
Last week was a useful reminder that a single data point, however large the surprise, rarely tells the whole story. August's payrolls beat was significant, and the market's swift repricing of rate-hike odds shows how sensitive positioning remains to incoming data, but we would caution against reading too much into any one report in either direction.
With CPI due out this Friday, we expect the market's attention to remain squarely on inflation over the next several weeks. A macro backdrop of resilient growth alongside firmer inflation would tend to favor larger-cap, higher-quality, more cyclically-oriented exposure, while pressuring more rate-sensitive corners of the market such as utilities and housing — a dynamic we are watching closely as we position portfolios.
We remain diversified across market capitalizations, sectors, and geographies, and continue to view healthcare's ongoing strength as a continuation of a long-standing thesis rather than a new or surprising development. As always, we believe a disciplined, data-driven approach, rather than reacting to any single week's headlines, is the best way to navigate the shifting landscape ahead.
If you have any questions about the above, please reach out to us to set up a one-to-one meeting so we can review your situation.
Sincerely,
President
SBC Investment Management
P: (602) 641-5996 · M: (319) 520-2033 · E: bandrus@sbcinvestmentmanagement.com
Investment Analyst, Junior Portfolio Manager
SBC Investment Management
P: (435) 775-2950 · M: (435) 590-8317 · E: jrehkop@sbcinvestmentmanagement.com