Hope you are all doing well. What started off as a terrible week ended up not so bad with the Dow and Nasdaq down less than 1 % and the S&P flat for the week. The Dow on Monday shed 1,034 points, the 12th-largest single-day point decline on record. While the pundits make you think this something that never happens, they are wrong. There have been 25 total daily moves in the Dow of more than 1,000 points, 14 down and 11 up. While the size is noteworthy, keep in mind that last Monday’s 1,034-point move is only a decline of 2.6%. By comparison, the 1,033-point drop on February 8, 2018, was a 4.2% move. If you have been watching the Olympics this week, you may have noticed they show Snoop Dogg at almost every event. I am much more shocked that Snoop Dogg has become America’s mascot than I am by the moves in the market this week. I have broken down this week’s update using some of Snoop’s songs
Drop It Like It’s Hot
To paraphrase the lyrics many investors were keeping a white flag hanging out their front side. Monday morning was scary as people tried cashing in gains before they eroded. Market declines of any size can feel unsettling. The 3% decline in the S&P 500 was bad and worthy of attention. However, we really just gave back the gains we made in the better-than-2% jump in the final few days of July. It’s easy to lose your head when market volatility strikes. Don’t because it’s often related events that do not fundamentally impact the trajectory of the market. The trajectory is still positive, the stock market is still up nearly 20% over last year and 50% since this bull market began in October of 2022. There is nothing fundamentally wrong with the stock market.
Lodi Dodi
The U.S economy won’t cause trouble and don’t bother nobody. That is except for JP Morgan and Goldman Sachs. Goldman Sachs has raised its odds of a U.S. recession to 25%. JPMorgan sees a 35% chance of a recession one starting before year-end. Implied in the number is that the greater likelihood is we are not heading for a recession. A better than expected jobless claims number on Thursday supported my view and sent stocks rallying. As I said last week, the reaction to the growth in the unemployment rate was overblown because the labor force is still expanding and payrolls are still growing.
Ain’t No Fun
Disney reported earnings and they have not been so swift on their toes. As they caught off guard by the slowing consumer. Disney’s theme parks are an interesting read on the consumer. When people feel like they have the money for discretionary spending they are more likely to book a trip to Disney. The company reported that theme parks have slowed down. Stating, the U.S. theme parks business was impacted by consumer demand and inflation. More importantly, executives on Wednesday’s earnings call said flat attendance, particularly at U.S. parks, is likely to carry over the next few quarters. It could be that consumers have tired of Disney and are choosing to spend on different experiences and may not be indicative of the consumer as a whole. Either way it bears watching as consumer spending makes up roughly 70% of the economy.
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