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We are delighted to share our August Market Outlook which provides you with our current thinking on the economy, markets and portfolio positioning. In addition, we’ve shared the key economic statistics that we are watching closely.

Economy & Markets 

  • As July ended and August began, a series of economic reports upended investor sentiment regarding a gradually slowing economy and the ability of the Fed to avoid a recession. 
  • Economic growth was a strong 2.8% in the quarter with real underlying demand at 2.6%. This strong report was followed by slower than expected manufacturing and construction spending data, while initial claims for unemployment rose to the highest level in a year. 
  • These reports painted a picture of a healthy economy in the first half of the year but perhaps an economy slowing more than expected in the second half.

Equities 

  • The S&P 500 finished July with more modest gains of 1.2% but continued building on the solid year-to-date totals. As of July 31st, the S&P was higher by nearly 16% and the Nasdaq composite was higher by more than 17% for the year. The market will likely consolidate its gains through the seasonally challenging months of August and September, with heightened volatility. 
  • During July, 9 of 11 economic sectors outperformed the broader market, with information technology and communication services the only sectors to finish the month with negative returns. There are signs of a leadership shift, with the Magnificent-7 stocks lagging the broader index, and more interest rate-sensitive areas like financials, utilities and REIT’s faring better.

Fixed Income 

  • Bond yields decreased in July on weaker economic data. Expectations continue to point to an anticipated FOMC rate cut in September. 
  • Credit spreads widened slightly, but are still not showing any signs of stress, signaling comfort with the economic outlook.

Employment

  • July’s unemployment report raised fear that the Fed has been too restrictive and may be pushing the economy into a recession. The unemployment rate increased to 4.3%, a nearly three year high. Job growth seen over the last several years is clearly slowing.
  • Wages grew by 3.6% from a year earlier, which was also below the 3.8% growth seen in June. One bright spot was the increase in the labor force participation rate for those in the 25–54 year-old age bracket, rising to the highest level in over two decades.

Federal Reserve

  • The July Fed meeting confirmed for most investors that they are prepared to lower rates at their September meeting. Softer economic news that was reported after the meeting opened the door for a potential cut of up to 50-basis points. 
  • Chairman Powell, in his comments after the meeting, repeatedly characterized the cooling of the labor market as a process of normalization from the previous overheated state.

Issues to Watch 

  • The U.S. Presidential race has changed dramatically as Kamala Harris has become the candidate for the Democratic Party. Polling has significantly tightened, and the race is now a statistical dead heat, a dramatic change from a month ago.

A chart from Bloomberg displays investment metrics as of July 2024

1Data provided by Bloomberg. Metrics are as of month-end or most recent publication
2Provided by U.S. Real GDP Economic Forecast Survey Median 
3Provided by World Real GDP Economic Forecast Survey Median 
4Provided by Bloomberg Intelligence Forecast 
5Provided by World Probability Forecast 
6Arrows represent a month-over-month change

A chart depicts index returns as of July 2024

Asset Allocation / Tactical Positioning - August 2024

A chart depicts the asset allocation / tactical positioning as of August 2024

1Equity tactical weights are relative to the Cambridge Trust Core Equity allocation and is comprised of 80% S&P 500 and 20% MSCI AC World ex-U.S. Index. 
2Fixed Income tactical weights are relative to the Cambridge Trust Core Taxable allocation and is comprised of 100% Barclays Intermediate Gov/Credit Index. 
3Below investment grade holdings include high yield and emerging market debt mutual funds. Represents an out-of-benchmark allocation that will be reflected as an overweight position relative to the Barclays Intermediate Gov/Credit Index if any allocation is held. 
4Alternative tactical weights represent an out-of-benchmark allocation that will be reflected as an overweight position when utilized and neutral position when not. 
5Direction arrow highlights any recent changes of the overall allocation after a recent tactical asset allocation or strategy change. Last changes were made at July 2024 Asset Allocation Committee meeting.


Cambridge Trust Wealth Management is a division of Eastern Bank. Views are as of August 2024 and are subject to change based on market conditions and other factors. The opinions expressed herein are those of the author(s), and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, Eastern Bank Wealth Management, Cambridge Trust Wealth Management or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice based on market conditions and other factors. These views and opinions should not be construed as a recommendation for any specific security or sector. This material is for your private information, and we are not soliciting any action based on it. The information in this report has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information. Past performance does not guarantee future performance. Investment Products are not insured by the FDIC or any federal government agency, are not deposits of or guaranteed by any bank, and may lose value.