Hope you are all doing well. U.S. indexes were little changed overall as stocks took a breather following a rally that lifted the S&P 500 and the Dow to record highs the previous week. The S&P 500 and the NASDAQ ended the latest week fractionally higher while the Dow was fractionally lower. Thousands of mourners lined the streets in the U.K. this week for a procession before Bonnie Tyler’s funeral on Monday. I have broken down this week’s update using lyrics from her biggest hit, “Total Eclipse of the Heart.”
Every now and then I get a little bit tired of listening to the sound of my tears
Bond investors who have stayed invested these past ten years hoping for a turnaround could be holding on forever. Concerns about long-term inflationary pressures boosted yields again this week. The 30-year U.S. Treasury is back to a level it had reached two weeks earlier, which was the highest since 2007. On Friday afternoon, the 30-year yield was around 5.26%, while the 10-year Treasury yield remained elevated at 4.69%. In contrast, the 2-year Treasury yield was slightly lower for the week at 4.17%. Don’t be like the song lyric and think you can make it to the end of the line; get out of bond investments and lock in the higher interest rates using principal-protected investments like fixed annuities or CDs.
Every now and then I get a little bit nervous that the best of all the years have gone by
For the past several years, post-COVID consumer spending has driven some of the best economic growth our country has ever experienced. Consumer spending drove initial economic recovery through pent-up demand and government stimulus, but growth continued through the next several years as consumers continued to spend. Now that willingness to spend is only falling apart. Spending has begun to normalize. Inflation, high interest rates, and depleted savings have shifted spending behavior toward essential goods and selective experiences rather than broad, rapid consumption. We got signs of that this week as U.S. retailers recorded a monthly sales decline for the first time in nine months. Sales were down 0.6% in July after a 0.2% gain in June. A separate report on Friday showed weakening in U.S. consumer sentiment but stable inflation expectations.
Forever’s gonna start tonight
To paraphrase the song, small-cap stocks: there is no investment in the universe as magical and wondrous as you. The Russell 2000 Index again hit its forever high this week. Wednesday, it eclipsed the high that it had set a week earlier. As of Friday’s close, it was up more than 1% for the week. Russell 2000 is significantly outperforming other major U.S. market indexes this year. Driven by a rotation out of mega-cap tech and into small-cap stocks. The small-cap index has surged over 20% year-to-date, pacing for its strongest annual performance in over two decades. I still think large-cap will regain its dominance at some point. However, the run in small caps has brought Russell 3000 index investments like the Vanguard Total Stock Market Index up to all-time highs even as large-cap tech stocks take a bit of a breather in their ascent.
You can use my calendar link below to schedule a phone or Zoom appointment at any time. The calendar link allows you to schedule a call as early as tomorrow. If you have a time-sensitive issue and difficulty reaching me by email or phone, it’s generally best to use the calendar link to schedule a 15-minute appointment. If it has been a while since your last review and you aren’t currently on my calendar, please schedule an appointment.
