The Pulse on the Economy and Capital Markets: August 2024
August 22, 2024
To Summarize: In August, we saw significant market volatility leading to sell-offs, followed by
record-setting rallies. Earnings season presented mixed results with stronger profits and
disappointing revenues. The economy is showing mixed signals as growth continues but at a
slower rate. Consumers continue to spend but are delaying big ticket purchases until the
Federal Reserve (Fed) lowers interest rates. We unpack this and more in the August edition of
The Pulse.
In the Markets: The stock and bond markets rallied on potential rate cuts with market cap
weighted S&P 500 and Nasdaq outperforming and investment grade bonds rising in August.
However, volatility has been the story of the quarter for equity markets, specifically the Yen
Carry Trade unwind before the market subsequently rebounded.
Mixed Earnings Season: The second quarter closed with better-than-expected earnings and
data remaining positive, yet the market also anticipates weakening revenue. Despite indicators
pointing higher, future economic growth is not impacting companies equally. Large companies
who have diversified revenue streams have protected their profit margins, while smaller
companies have more floating rate debt and pressured margins.
Growth Rates in Consumer Spending Have Likely Peaked: Consumers continue to spend;
however, the growth rate trend is decelerating as consumers begin to evaluate their spending
habits. CEOs of large retailers, such as Home Depot, Lowe’s, and Harley Davidson, have noted a
delayed spending on big ticket items as consumers are waiting for the Fed to change the
interest rate policy.
Top Headlines: We’re reading about the biggest M&A deal in the history of the convenience-
store industry, lenders resorting to extreme measures as private equity-owned companies
default, apartment occupancy and rent growth continues to stabilize, and how AI is
transforming the manufacturing industry.
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