Key Highlights
- The S&P 500® was down 1.77% in August, bringing its YTD return to 17.40%.
- The Dow Jones Industrial Average® decreased 2.36% for the month and was up 4.75% YTD.
- The S&P MidCap 400® posted -3.04% for the month, bringing its YTD return to 8.85%.
- The S&P SmallCap 600® was down 4.33% in August and had a YTD return of 5.99%.
MARKET SNAPSHOT
The June and July celebration (the S&P 500 was up 9.79% over the two months) of the end of Fed interest rate increases, along with the expected start of cuts and end of inflation, came to an end in August, as the market started to focus on the potential of higher interest rates for a longer time period, fueled by a stronger economy (which is being fed by a spending consumer and spending government). That concern resulted in a 4.78% decline from Aug. 1-18, as some profit-taking and reallocation appeared to add to the fall. From that point, economic data (i.e., housing, JOLTS and employment reports) painted a slowdown in growth, and the market increased 3.16%, with the month ending down 1.77%. Breadth improved but remained negative for the month (350 down and 153 up for August compared to 54 down and 449 up for June and July).
For both time periods, the market seemed to be testing its level, looking for its support point with higher volatility (intraday high/low went up to 1.01% from July’s 0.68% and was the highest since March’s 1.51%). The testing is expected to continue next month on an issue level as analysts review their Q4 2023 and 2024 projections ahead of the Fed's Sept. 19-20 meeting. The market (according to futures) is pegging an 89% chance of no change, which becomes a 38% chance of a 0.25% increase at the Nov. 1 meeting. On the bright side of an increase, the market is fully prepared to accept a 0.25% increase, as long as the verbiage indicates that it is the last one. Overall, volatility is expected to increase and differentiate based on industry and issue projections, with any Fed action or commentary raising or lowering all boats.
Of note, current political events have not yet had a significant impact on the market, possibly because the election is 16 months away. Also of note, September is historically the worst-performing month of the year (from 1928), going up only 44% of the time (-9.35% in September 2022, -4.76% in 2021 and -3.99% in 2020), with an average decline of 1.12%.
For August, the S&P 500 closed at 4,507.66, down 1.77% (-1.59% with dividends) from July's close of 4,588.96, when it was up 3.11% (3.21%). For the three-month period, the index was up 7.84% (8.28%), as the YTD return was 17.40% (18.73%) and the one-year return was 13.97% (15.94%). The 2022 return was -19.44% (-18.11%), 2021 was up 26.89% (28.71%), 2020 was up 16.26% (18.40%), 2019 was up 28.88% (31.49%) and 2018 was down 6.24% (4.38%). The index was down 6.02% (-3.39%) from its Jan. 3, 2022, closing high and up 33.12% (41.00%) from its pre-COVID-19 Feb. 19, 2020, closing high. Monthly intraday volatility (daily high/low) increased to 1.01% from last month’s 0.68% (0.88% in June, 0.96% in May) and was 1.09% YTD.
S&P 500 trading increased 1% (adjusted for trading days) for August, after being down 10% in July and up 4% in June, as the year-over-year rate was up 12% over August 2022. The August 2023 12-month trading volume was up 16% over the prior period, after full-year 2022’s 6% increase. In August, 5 of the 23 trading days moved at least 1% (2 up and 3 down), as none of the 20 trading days in July moved at least 1% and 4 of the 22 days in June moved at least 1% (all 4 up). Year-to-date, 46 of the 167 days moved at least 1% (27 up and 19 down), and 2 moved at least 2% (1 up and 1 down). Of the 23 trading days in August, 12 had a high/low intraday spread of at least 1% and none of at least 2% (last month, 2 of the 21 trading days had a spread of at least 1% and none with at least 2%). Year-to-date, there were 80 intraday moves of at least 1%, 12 of at least 2% and none of at least 3% (the last 3% move was on Nov. 30, 2022). The Dow Jones Industrial Average ended the month at 34,721.91, down 2.36% (-2.01% with dividends) from last month’s close of 35,559.53, when it was up 3.35% (3.44%) from the prior month’s close of 34,407.60 (4.56%, 4.68%). The Dow® was down 5.65% from its Jan. 4, 2022, closing high of 36,799.65. The three-month return was 5.51% (6.10% with dividends), as the YTD return was 4.75% (6.37%), the one-year return was 10.19% (12.58%) and the 2022 return was -8.78% (-6.86%).
