Wow, that was quick!

​As the month of July was closing out, we were watching earnings reports wondering when the Fed was going to lower rates. Suddenly, the stock market started selling off, with the decline accelerating by Friday and continuing into Monday. We’ve since regained a bit of ground but continue to see above average volatility in prices.

So, what caused this panic?

It’s not just one thing. It’s a mix of factors like earnings misses from some of the “Magnificent 7” stocks and lower-than-expected employment numbers. A friend recently reminded me of the saying, "When the United States sneezes, the rest of the world catches the flu." It’s quite fitting for today.

Yes, the employment numbers were off, but not drastically. In fact, weak numbers like these are needed to justify the Fed lowering rates. It was only a matter of time before one of the Magnificent 7 stocks was going to have some bad news, and investors would decide to rotate out of these stocks and reinvest in other segments of the market. In other words, it’s about time for some sector rotation. Sometimes, it happens slowly and under the radar, while at other times, it’s announced with a trumpet.

Going forward, we don’t see a major shift in the economic outlook. Sure, maybe the economy will slow down a bit but likely not enough to cause a recession in the near term. Inflation has been in a noticeable downtrend for a while now, and despite all the headlines, the S&P 500 is still up over 9% year-to-date.

If you feel the need to do something, we recommend reviewing your asset allocation to ensure it still aligns with your goals—we’re happy to help with that. Otherwise, we suggest you spend less time watching the financial news and more time doing the things that bring you joy.
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