The following is your August 2024 Robertson Stephens Monthly Performance Report.
August was unusually eventful for investors right from the start and dashed any hopes of a late summer lull. Disappointing U.S. economic data, together with a surprise interest rate hike by the Bank of Japan, sparked a sharp sell-off across the global equity markets. Panic selling is loosely defined as investors of all kinds hitting the sell button on their computers simultaneously without fundamentally knowing why – just that everyone is doing it. There was panic selling of equities around the world in U.S. pre-market trading, early the first Monday of the month – the Japanese equity market was down 12% in their trading session. Fortunately, investors were able to solve the puzzle – now known as the carry-trade unwind – and apply rational price discovery to their buy and sell orders once again. At the end of that day, the S&P 500 Index (SPX) finished down -3.0 %, a minor victory considering the early morning “look”. The SPX finished the week virtually unchanged – a major victory for the bulls.
The carry-trade notwithstanding, weaker-than-expected U.S. economic data throughout the month led to a modest growth scare giving investors confidence that the Fed would cut interest rates more than the Fed had already been hinting at. Aggressive rate cut expectations also led investors to believe that the Fed would stick a soft-landing for the economy. The second half of the month was essentially an all-asset (stock, bond, commodity, currency) rally based on the soft-landing narrative. See monthly performance chart below.
As we enter September, as you may have gleaned from recent Morning Notes, I’m not sanguine on equities, and remain bullish on fixed income. My concern is that while the bond market seems to be pricing in a recession, the stock market seems to be pricing in a no-landing and remains within a stone’s throw of its all-time highs.
Be well,
Mike
Sources: Addepar, BCA Research, Bloomberg, and Ned Davis Research
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