Originally published at: This week in charts: Stocks storm back – InvestEngine Insights
A roaring month for stocks
The S&P Equal Weight hit its highest point in over a year, rising 17% since this time last year. While the main market, the S&P 500, is still slightly below its all-time-highs, it’s seen a fantastic run since the early August selloff. Last week saw the index rise 8% over 8 days, almost managing to rise every day for 9 days, which would have been the longest streak of positive daily returns in 20 years. While the rally has been broad, lifting the Equal Weight, technology stocks have led the way, up almost 50% this year:
Rate cuts incoming
A rate cut in September now looks like a foregone conclusion. Thursday saw both a revision to US payrolls data, which found that earlier estimates may have overstated employment, and minutes from the last Fed meeting in July. The minutes noted that, “the vast majority of Fed committee members observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.” With more comments expected from Jerome Powell at Jackson Hole today (Friday), markets will be hoping for additional reassurance over a clear path for cuts.
The dollar in decline
Sterling reached a high for the year of $1.31 on Thursday. The rally in the pound is being driven less by the strength of the pound, and more by a weakening dollar. The US dollar selloff is being caused by the unwinding of the yen carry trade (which resumed this week), plus increased dovishness from the Federal Reserve surrounding the path of rate cuts. The euro also hit 2024 highs against the dollar this week.
Cash on the sidelines?
Although the total amount invested in money market funds has skyrocketed since COVID, rising from $2.6trn to now over $6.2trn, as a percentage of the size of the stock market, money market funds assets remain low. Due to the strength of the stock market, this figure has been trending lower this year, down from 15% at the start of the year, currently at 13%.
Why is inflation falling?
Since inflation in the UK peaked in October of 2022 at 11.1%, inflation has been steadily falling. Back at the peak, the causes of the high inflation were energy costs and food prices. Today, however, it’s a different story. Energy prices have fallen versus this time last year, so are now detracting from the overall inflation figure. Food inflation is also now minimal at 0.2%. What’s keeping inflation high today is restaurant inflation (0.6% of the total 2.2%), rent inflation (0.6%) and ‘recreation and culture’ (0.5%) – the main inflationary recreation culprit being pet-related products and services.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.