Stock markets were volatile this week and (as of Friday morning) are looking to finish the week slightly lower apart from US small cap stocks, which have had another good week and are set to finish higher. Bonds were mainly flat this week, but remain higher for July.
Most of the market volatility came down to two factors this week. The first was the partial unwinding of the “Trump trade.” Due to President Biden’s weak presidential debate performance in June, investors began shifting capital towards investments they believed would outperform under a second Trump administration. The announcement last weekend that President Biden would exit the race and Vice-President Kamala Harris would be the presumptive Democratic candidate injected uncertainty into the outcome of the November elections. As such, investors were forced to adjust their market bets accordingly.
Secondly, nervousness around the very high valuations of a handful of tech stocks was shown to be warranted this week as two major tech companies disappointed the markets with their 2nd quarter earnings reports. It was enough to push the tech-heavy Nasdaq down over -2% this week and into negative territory for July.
Markets will be focused on the Fed meeting next week, although they are pricing in just a 5% chance of a rate cut. We expect the Fed will use this meeting to prepare markets for the first rate cut to occur in the September meeting.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
Harmon Financial Advisors, Inc. is an independent, fee-based financial planning firm and an independent Registered Investment Advisor. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. and Harmon Financial Advisors, Inc. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Harmon Financial Advisors, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.
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