August saw renewed volatility in stocks, following a remarkably strong year thus far.
The S&P 500 Index fell -1.8% for the month, but is still up 18.1% for the year and only off 3.2% from its late-July high. Similarly, the Dow is 3.4% below its closing high in mid-July.
All major stock indexes were down for the month. U.S. large-cap stocks held up best with the Dow down -1.4% in August, while the small-cap Russell 2000 lost -4.9%. The developed-market EAFE Index fell -1.9% and emerging markets sank -3.8%.
Bonds, on the other hand, had a great month, as interest rates, both long and short, steadily declined. The benchmark 10-year Treasury bond yield fell from 2% at the start of the month to 1.5% at the end, mirroring the upward trajectory of bonds.
The question now is, what’s next?
Financial news has focused on the link between an inverted yield curve and a recession, but even experts disagree on what the future holds. Some think it's no longer a matter of whether we get a recession, but how long until it starts. Others believe recent circumstances are far different from those that preceded prior recessions. Unlike previous recessions, for instance, overall inflation is low, and the Fed has hinted they'd like to see it higher.
Here’s what we know
Recessions are inevitable and occur at the end of every economic cycle, and as long-term investors, we should expect to invest through changes in the economy.
At FundX, we don’t rely on forecasts or need to know what the future holds. Rather, we start with a clear plan that includes an allocation to stocks and bonds that’s based on your unique goals and needs. Then we let current performance show us what funds and ETFs are working in this ever-changing environment, and we adapt as markets change.
If you’d like to learn more about how we might help you plan and invest through changing markets, click here.