Investors endured another volatile five-day stretch as the combination of trade uncertainty, plunging global bond yields, and conflicting messages between the United States and global economies further pressured stock prices. It may seem hard to believe that the S&P 500 Index achieved record levels just three weeks ago, but that speaks to the curious nature of the current market dynamics, along with the seasonal weakness typically associated with the Dog Days of Summer, as August and September historically deliver the weakest monthly returns for the equity markets.
The Fed cut interest rates for the first time in 10 years. Economic data still doesn’t warrant a cut, but U.S. businesses need a confidence boost. This rate cut will likely not be a one-and-done event.
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Stocks endured significant volatility last week but showed some resilience Wednesday, August 7, when the S&P 500 Index dropped as much as 2% intraday before rallying back late to close slightly positive. Stocks ended the week near flat, putting the S&P 500 about 3% away from its record high.
Last week’s stock market slide begs the question whether this August will fit its historical pattern of seasonal weakness. With the latest escalation of trade tensions, investors should be prepared for more market volatility this month. Other keys for stocks this month include the Fed and earnings, although the impacts of both are likely to be drowned out by trade concerns.