The financial markets entered a summer slump in August.
The US government debt rating downgrade by Fitch Ratings was the initial catalyst for higher Treasury yields (and lower prices) early in the month. Minutes from the Federal Reserve’s July meeting, where interest rate policy is set, were released in mid-August and supported the narrative that central bank officials won’t be in a rush to bring rates down any time soon.
Market participants’ interpretation of the Fed’s interest rate policy kept the pressure on bond yields and hurt returns.
For August, the Bloomberg US Aggregate Bond Index fell by 0.63%. Through the end of August, the US bond market return year-to-date was still positive at 1.6%.
Higher bond yields took some of the summer heat out of stocks. For the month of August, the S&P 500 index of large company US stocks fell by 1.63%. Foreign stocks sold off by 3.9%.
Year-to-date, though, stocks are still significantly in the black. US stocks gained 18.7% and foreign stocks were up by 10.9% as of August 31.
Below is a summary of August returns.
RK
