GoalVest Advisory
September Update
Markets continued to march forward in August
Equity markets extended their positive trend in August, marking a fourth straight month of gains. Through August 25th, the S&P 500 was up 1.7%, the tech-heavy Nasdaq was up 0.9%, the slower-growing companies represented by the Dow were up 2.7%, and the small-cap stocks of the Russell 2000 were up 5.9%. Year-to-date, the S&P 500 was up 10.3%, the Nasdaq was up 11.8%, the Dow was up 7.4%, and the Russell 2000 was up 5.7%.
Fixed income markets also improved, with the Bloomberg US Aggregate Bond Index up 1.0% in August as of the 25th and up 4.0% year-to-date, outperforming last year’s return.
The CBOE Volatility Index (VIX) closed on the 25th at 14.8, well below 20 (which is considered stable) and far from its April high. Concerns over inflation and tariffs have eased, although valuations continue to keep earnings in focus for the third and fourth quarters.
Economic data
The Bureau of Labor Statistics released its inflation and employment reports in August. In the inflation report, it was reported that the July CPI rose 2.7% year-over-year, with modest monthly increases (0.2%) reflecting the impact of tariffs and utility costs. In the employment report, they reported slower job growth in July with just 73,000 new jobs and an unemployment rate of 4.2%. At the same time, the previously reported May and June new jobs numbers were revised down by a combined 258,000. Despite initial concerns over these numbers, equities rallied throughout the month.
Regarding inflation, there was no official Fed meeting in August. However, Fed Chairman Jerome Powell indicated rate cuts may be coming during his speech on August 22nd in Jackson Hole, WY.
Market encouraged by less costly tariffs
Markets responded positively as U.S. tariffs on Japan and the EU were set at 15%, lower than the proposed 25%. This rate will likely produce a headwind for the economy and put some pressure on prices, but it is widely viewed as manageable.
Tariffs with Canada, Mexico, and China remain unresolved. However, investors hope for similar moderate outcomes.
To Sum Up
We believe equities can continue performing well into year-end, supported by solid earnings, moderate tariffs, and low volatility. While volatility could pick back up depending upon inflation increases or disappointing earnings, overall market valuations and fundamentals remain supportive of a positive fourth quarter.
Opportunities remain in areas such as private equity and credit, venture growth, tech growth, and dividend strategies. With valuations at 22.4 times forward earnings, the economy remains in a reasonably strong position, and U.S. companies are still largely resilient, profitable, and innovative, supporting a constructive long-term outlook.
Sevasti Balafas, CFA, CPWA®
CEO & Founder
GoalVest Advisory
Sources: JP Morgan Asset Management, Bureau of Economic Analysis, Bureau of Labor Statistics, Morningstar, Factset, Barron’s, KKR, and YCharts
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