Market Update 8/5/24

Timing Market Bottoms

Global equity markets are experiencing a sell-off, and futures indicate a severe downturn. The US unemployment rate stands at 4.3%, higher than expected, leading to fears of a recession. There’s concern that the economy is slowing more quickly than anticipated, and the Fed’s interest rate is more than 2% higher than the inflation rate. In times of confusion like this, it’s important to take a step back and look beyond the immediate headlines.

Not too long ago, the markets were celebrating lower inflation as strong CPI and employment reports pushed equity markets down. But on Friday, this narrative completely changed, and I’ve taken notice. The GDP grew to 2.8% last quarter, and unemployment is still well below the long-term average of 5.69%. Additionally, interest rates have fallen significantly, which will ease lending constraints. The current data doesn’t support recession fears, and the global risk-off trade could quickly come to an end. The best indicator to watch for this change is the volatility index (VIX), which has spiked to its highest point since April 2020. However, many stocks will likely reach their low points well before the index signals a buy, and we are taking advantage of this market panic by selectively adding to our favorite ideas.

As always, I appreciate your continued trust and confidence.