US stocks continued their rally in August, posting gains for the fourth consecutive month with small cap companies leading the way. Earnings reports continued to beat muted forecasts for the second quarter, and softening labor market data highlighted by downward revisions to previous job reports heightened expectations for the Federal Reserve (Fed) to cut rates sooner rather than later.
At the Jackson Hole summit, Fed Chairman Jerome Powell cited the need to balance the economic risks of unemployment and inflation, signaling a shift in tone from previous comments. The yield curve continued to steepen and yields broadly declined throughout the month. Bond prices surged, with investors expecting multiple rate cuts by the end of the year despite inflation ticking higher.
Looking abroad, international stocks outpaced their US counterparts. Developed markets performed well despite political uncertainty in France from a no-confidence vote around their deficit reduction plan weighing on stocks. The Bank of England continued their rate cutting despite their most recent inflation print coming in hotter than expected. Global bond performance was mixed as yields edged higher in Europe but declined elsewhere.
In the coming months, continual economic updates regarding the labor market and inflation trends will be front and center as the Fed is expected to take action at their September meeting. Trade and tariff updates from Washington will continue to influence markets.
| Index Performance | August | Year to Date | Trailing 12 Months |
| US Stocks (Russell 3000) | 2.31% | 10.58% | 15.84% |
| International Stocks (FTSE AW ex US) | 3.59% | 21.90% | 16.13% |
| US Bond Mkt. (BBgBarc Int. Gov/Cred) | 1.22% | 5.27% | 4.70% |
| Cash (ICE BofA ML 3-Mo T-Bill) | 0.39% | 2.83% | 4.48% |