Your Monthly Market Newsletter, July 2024

July is coming in hot, as is the stock market. The three major indices – Dow Jones Industrial, NASDAQ, and S&P 500 – ended the second quarter strongly in June. Though the Federal Reserve (Fed) is still holding out on cutting interest rates, there is good inflation news. In May, consumer price increases cooled even lower than expected at 3.3% year-over-year, and the Consumer Price Index (CPI) came in at its lowest point since June 2022. The May jobs report showed that the unemployment rate hit 4%, a sign that the labor market is softening and coming into “better balance,” according to Fed Chair Jay Powell. However, consumers continue to have negative feelings about the economy as many feel dissatisfied with higher prices, showing a disconnect between consumer perception and the actual data.

In recent years, high mortgage rates have made homeownership unattainable for many, particularly first-time home buyers. Compounding the issue is the escalating cost of homeowner’s insurance, a direct result of more frequent and severe weather events. States vulnerable to hurricanes, wildfires, and tornadoes have seen higher insurance rates and reduced coverage over the past several years, while “billion-dollar thunderstorms” are increasing in frequency across states like Michigan, Iowa, and Idaho. As the industry corrects itself to try to keep pace with climate change, many more homeowners will feel the pinch of rising insurance rates.

This month, as we reflect on independence and what that means for us, you may be considering how you can achieve financial independence. As a general guideline, the journey to becoming independent from financial burden (and the resulting freedom it brings) stems from creating a surplus between your income and expenses. There are many ways to do this; here are some tips to help you get started:

• Set goals. Set clear short-, mid-, and long-term goals that are attainable and motivate you to stick to your plan. 
• Build a Budget:List all income sources and expenses to assess your current financial situation. Also, evaluate your discretionary spending and identify what you can tighten up or do without. 
• Emergency Fund.Set aside money in an emergency fund that can cover up to three months of all expenses.
• Pay Down Debt. Review your current debt to determine where to start. You might focus on debt that can be paid off easily (lowest amount) or the debt that costs you the most (highest interest rate). The goal is to be very intentional about your debt, avoid overspending or living outside your means, and never undertake debt you can’t afford. 

Building a solid foundation is essential toward achieving financially independence. If you have any questions about your current financial plan or need guidance in creating a plan to help you achieve your vision of financial independence goals, reach out to our office. We’re here to help! Have a safe and happy 4^th of July!

Stocks

The U.S. equity markets persisted throughout June and maintained upward momentum with all three major indices ending the quarter on a strong note. The tech-heavy NASDAQ and the S&P 500 were driven by NVIDIA, which alone accounted for 35% of the S&P 500 gains year-to-date. Even the Dow Jones, which lacks a significant tech presence, managed to post gains, albeit more modestly than the other U.S. equity indices. The broader market benefited from falling inflation rates, instilling optimism in investors that the Fed is still on track to cut interest rates later in the year.

Sector Performance

Despite a strong index-level performance, only five of the eleven sectors of the S&P 500 were positive this month. Technology continued to lead the way, climbing almost 10% higher for the month as the Magnificent 7 (NVDA, META, MSFT, GOOGL, TSLA, AAPL, and AMZN) led the pack. Utilities were the worst-performing sector this month after performing strongly in May, though it remained over 9% for the year. Rising oil prices (due to potential increases in supply) likely impacted Energy’s performance, causing the sector to slip. Real Estate is the only sector with a negative return year-to-date, and though it had some relief in June, it remains down almost 3% for the year.

Bonds

Fixed income assets climbed higher in June as yields fell about 10 basis points on the 10-year Treasury. The bond market responded favorably to softer-than-expected inflation data throughout the month, indicating the Fed will be more likely to cut rates this year. Yields are still elevated relative to where they started the year, as interest rate volatility tied to recently released economic data points remain high.

Economic Update

The Personal Consumption Expenditures Price Index (PCE) fell to 2.6% in the most recent reading. As the Fed’s preferred gauge of inflation, the moderation was welcomed. It also signaled the first of three months of stabilizing prices after inflation was sticky earlier this year. The final revision of Gross Domestic Product (GDP) moved slightly higher, ticking up to 1.4% annualized for the year’s first quarter. Although the unemployment rate ticked upward slightly to 4%, the U.S. economy added jobs for the 41st consecutive month.

Engineering Students Help Drummer Find Her Beat

Not having hands hasn’t stopped Aubrey Sauvie from pursuing her interests. The active 12-year-old was born missing both arms below her elbows and several toes on her feet, yet she participates in Tae Kwan Do, art, dance, and is even learning to play the drums. However, despite her efforts, she couldn’t quite match the sound quality and volume of her snare drum to that of the other drummers in her middle school band class. To help her out, Sauvie’s band teacher recommended her as a candidate for Tennessee Tech’s Engineering for Kids (TEK) program.

Ten mechanical engineering students involved with TEK worked together to create custom prosthetics for Sauvie. The team observed how she interacted with objects daily, from applying makeup to playing percussion instruments. They designed the prosthetics entirely through 3D printing using a durable, flexible material that will be comfortable for Sauvie to wear in varying temperatures and can be adjusted as she grows.

The group hopes to continue working with Sauvie to create more attachments she can use in other areas of her life. To learn more about this amazing project, read here.

THOUGHT FOR THE MONTH

^{Index Definitions}

^{Dow Jones Industrial Average:The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.}

^{Dow Jones U.S. Real Estate Total Return Index:The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.}

^{NASDAQ Composite:The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.} 

^{S&P 500 Bond Index:The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.}

^{S&P 500 Consumer Discretionary:The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.}

^{S&P 500 Consumer Staples:The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.}

^{S&P 500 Energy:The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.}

^{S&P 500 Financials:The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.}

^{S&P 500 Index:The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.}

^{S&P 500 Utilities:The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.}

^{S&P U.S. Aggregate Bond Index:The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.}

^{S&P U.S. Treasury Bond Index:The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.}

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^{A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.}

^{Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.} 

^{Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.}

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