What goes up must come down. At least that was the case for markets in August…
After a strong start to the month, building off of July’s rally, stocks turned sharply lower in the second half of August. The selloff was largely caused by Fed Chairman Jerome Powell’s announcement that interest rate increases would proceed as planned, suggesting people and businesses could expect some pain as a result.
This news led to a volatile end to the month, with the S&P 500 falling 4.24%, the Nasdaq closing down 4.64%, and the Dow Jones Industrial Average suffering a 4.07% decline.
Following suit, the overseas markets didn’t fare much better. Inflation is taking its toll throughout the world and both emerging markets, down 0.46% last month, and developed markets, which took a 5.82% hit, are suffering as a result.
Not even the fixed income market could provide stability in August, as the aggregate bond market dropped 2.83%. This comes as the 10 Year Treasury Yield closed at 3.15%, up from 2.67% the previous month. As yields go up, bond prices go down, which has led to a persistently negative bond market so far this year. However, the silver lining is that higher current yields means higher expected future returns.
It remains to be seen what will happen moving forward, but September has historically been the worst performing month for the S&P 500 dating back to 1950, so some experts are warning of more volatility on the horizon. Even so, it’s possible that all the bad news circulating around has been priced in and therefore the worst may be behind us.
Investors are hoping strong seasonal factors, the slowing of inflation, and positive earnings growth will provide a boost to markets as we head into fall.
Big news came at the end of the month as President Biden officially announced that there would be student loan forgiveness for borrowers who make less than $125,000 a year (or households who make less than $250,000).
The debt cancellation promises a forgiveness of $10,000 for federally held loans and an additional $10,000 for those who received Pell Grants.
While this was the highlight of the announcement, there were additional benefits included, such as an extended repayment pause through the end of the year and an overhaul to the income-based repayment plan.
Payments used to be capped at 10% of an individual’s discretionary income, but that has been cut in half to 5% and negative amortization has been eliminated.
This means if the calculated payment doesn’t cover the interest, the balance will not continue to grow.
Clean, renewable energy continues to grow in popularity and relevance as more opportunities arise to go green.
Even the investment world has been following suit, with Environmental, Social, and Governance (ESG) funds seeing consistent net inflows over the last couple of years.
One industry that hasn’t kept pace is air travel—though Pipistrel, an aircraft manufacturing company in Slovenia, is trying to change that. They have developed the Velis Electro, a fully-electric two seater, which can be used as a greener option for trainee pilots. With gas prices rising and the harsh carbon footprint left by air travel, electric airplane concepts are expected to become more and more popular.
While all-electric commercial planes may still be a ways off, companies like Pipistrel are seeking to change the future of flight, by significantly reducing greenhouse gas emissions.
Broad Market Returns
| Asset Class | 1 Month | 3 Month | YTD | 1 Year |
| S&P 500 (VOO) | -4.13% | -3.96% | -16.20% | -11.24% |
| NASDAQ (QQQ) | -5.13% | -2.74% | -24.54% | -20.80% |
| Large Cap Growth (VUG) | -5.00% | -1.69% | -25.22% | -21.59% |
| Large Cap Value (VTV) | -2.68% | -5.82% | -7.26% | -2.59% |
| Small Cap Growth (VBK) | -2.39% | 0.30% | -23.66% | -26.10% |
| Small Cap Value (VBR) | -2.75% | -4.21% | -9.78% | -6.48% |
| Developed International (VEA) | -5.82% | -9.93% | -19.58% | -20.21% |
| Emerging Markets (VWO) | -0.46% | -5.05% | -15.98% | -18.91% |
| REITs (VNQ) | -6.01% | -5.52% | -18.87% | -11.97% |
| Aggregate Bonds (BND) | -2.80% | -2.14% | -10.78% | -11.72% |
| Corporate Bonds (VCIT) | -3.79% | -2.74% | -12.84% | -14.09% |
| High Yield Bonds (JNK) | -4.22% | -5.52% | -12.82% | -12.43% |
| Long Term Treasuries (VGLT) | -4.46% | -3.29% | -22.40% | -22.64% |
| International Bonds (BNDX) | -3.61% | -2.22% | -10.30% | -11.39% |
Market Health Indicator
The Market Health Indicator (MHI) measures market health on a scale of 0 – 100, analyzing various market segments such as economics, technicals, and volatility. Higher scores indicate healthier market conditions.
Fun Facts
- September has historically been the worst month for the S&P 500, but the range of returns has varied widely from -11.93% to +8.71%.
- The fastest gust of wind ever recorded on Earth was 253 miles per hour, during tropical cyclone Olivia off the coast of Australia in 1996.
- According to National Geographic, the entire world’s population could fit inside 500 square miles standing shoulder-to-shoulder.
- Brace yourself for UGG boots and Pumpkin Spice Latte’s. Fall officially kicks off on Thursday, September 22.
– The Aspire Wealth Team
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