“Market corrections are the price of admission to the wonderous theme park called the stock market.”
-Ben Carlson
Here’s what you need to know this week:
- Markets rebound from last week’s selloff
- Two reports show inflation continuing to decline
- Why market “corrections” are nothing to fear
Recovery
Stocks have recouped all the losses from last week’s short but dramatic selloff and are on the cusp of breaking into positive territory for the month of August. The market dip began due to the Bureau of Labor Statistic’s unemployment report for the month of July, which showed unemployment ticking up to 4.3%[1]. While this is still a relatively low level of unemployment, this report indicates that the economy is slowing more than analysts expected.
Slowing Inflation
In more optimistic news, two separate reports show that inflation continues to approach the Federal Reserve’s 2% target, giving investors more confidence that the Fed will cut interest rates at their next meeting in five weeks. The first report was the Producer Price Index (PPI), which measures the wholesale prices that producers pay for goods and services. The PPI report for July showed monthly inflation rising 0.1%, less than the 0.2% that analysts expected. It showed annualized inflation at 2.2%, much lower than June’s 2.7%.[2]
The second report was the Consumer Price Index (CPI) report for July, which measures the inflation on prices that consumers pay for goods and services. The July CPI report showed monthly inflation at 0.2% and annualized inflation at 2.9%, marking the lowest level of inflation in more than three years[3].
These reports, combined with rising unemployment, should provide the Federal Reserve with more than enough evidence that it is time to cut interest rates.
What is a Correction?
Over the past two weeks, you may have heard or read news talking about a market correction. In investing jargon, a “market correction” is simply when markets fall by more than 10% but less than 20%. Obviously no one likes to see their investments decline in value, but market corrections are no reason to panic. In fact, they are a common occurrence in the markets.
Since 1928, 63% of years have seen a stock market decline of 10% or worse[4]. Over this same time period, the S&P 500 has averaged an annualized return of 9.90%[5]. Like the quote says at the top, volatility is price of admission for the stock market. However, for long-term investors, the best strategy during times of volatility is simply to sit tight and ride it out.
What Else
- Democratic presidential nominee Kamala Harris selected Minnesota governor Tim Walz as her running mate
- Former President Trump and VP Harris have agreed to a debate on September 10th on ABC
- OPEC is planning on boosting oil production in the coming months, which may lead to lower gas prices
- The US tied China for 40 gold medals at the Paris Olympics; the US led the total medal count with 126
What We’re Reading
Amidst the cleanup effort in the aftermath of Hurricane Debby, one lucky volunteer found a message in a bottle that dates all the way back to World War 2. Click below to read the contents of the letter and the efforts to return the letter to its rightful owner:
What’s Happening Downtown
The Myriad Gardens is hosting Native Oklahoma Plants this Saturday, August 17th at 10 AM. This event will discuss strategies for incorporating native Oklahoma plants into your garden, and all guests will receive a native perennial to take home. Tickets are $20 and visitors must register by Thursday, August 15th in order to attend. Click below to learn more:
Written by: Kane Ogle, CFP®
Steve Beck, Amber Eduvigen, CFP®, Kane Ogle, CFP®, Cale Olbert, CFP®, Brett Valentine, Brandon Ingerson, Jenni Hess, Anne Boone
Sources: [1] NBC; [2] CNBC; [3] Bloomberg; [4] A Wealth of Common Sense; [5] Investopedia