Forty "W"ritings

In the world of what matters for investor returns who is in the White House has little impact. Historically, US stocks have risen regardless of who is in office and that is why it's important to not let your political emotions impact your investment strategy.

In August, equity returns started with a thud but clawed back losses by the end of the month. Softness in the labor market increased concerns about a broader slow-down in the economy causing some to speculate that the Fed may reduce rates at a quicker pace. As a result, treasury yields declined which was a positive for bond investors.

US stocks experienced a volatile pullback starting in Mid-July caused by some worrisome earnings reports from mega-cap tech companies, concerns about a slowing economy and geo-political tensions. Volatility is typically higher this time of the year particularly in election years when the out outcomes are uncertain.

Most market indices held on to positive returns despite a turbulent second half of July. Investors rotated away from the mega-cap tech stocks known as the "Magnificent 7" into value and small cap stocks. The stock market volatility in the second half helped drive bond yield lower pushing up bond fund returns.

The top 10 stocks in the S&P 500 have grown so large that they now represent 35% of the total index because of this concentration investors in the popular index will sink or swim largely based on the performance of those companies. For the first half of 2024 investors benefitted because the top 3 stocks Nvidia, Alphabet and Microsoft collectively were up 49% which accounted for 49% of the index's return. The index as a whole was up 14.5%.