Weekly Recap | August 28, 2023

August 21-25, 2023 Recap

Stocks Mostly Stabilize

Peak Rates May be Nearing
The S&P 500 and Nasdaq Composite posted gains last week, their first positive week since July 28. Equities stabilized late in the week, but performance remains negative for August. Investor sentiment was challenged by outsized declines in global economic surveys, but fears were more than countered by rising optimism that peak interest rates are nearing. On Friday, Fed Chairman Powell gave mixed comments at the Jackson Hole central bankers’ symposium.

For the Week…
The S&P 500 gained 0.84%, breaking a string of three straight weekly losses. The Dow Jones Industrial Average fell 0.42% and the Nasdaq Composite surged 2.27%. Amongst Russell indices large caps (+0.81%) outperformed mid (+0.12%) and small caps (-0.29%), led by a surge in large cap growth (+1.73%) over large value (-0.21%).

Comments From Jackson Hole, Wyoming
Federal Reserve Chairman Powell said policymakers are prepared to raise rates further if appropriate and will keep policy at restrictive levels until it is confident inflation is moving sustainably toward the 2% target. He, however, noted that “inflation has moved down from its peak, a welcome development, but it remains too high.”

Weekly Sector Insights
Seven of the 11 S&P 500 sectors posted gains last week, led by Technology (+2.58%), Consumer Discretionary (+1.14%), and Communication Services (+0.98%). Energy (-1.37%) and Consumer Staples (-0.73%) declined the most. Communication Services (+39.54%) and Technology (+38.83%) are up the most on a year-to-date (YTD) basis, followed by Consumer Discretionary (+29.94%).

Treasury Yields Fall
In relief, the yield on benchmark 10-year Treasury notes ended Friday at 4.231%, down slightly from 4.248% the week prior. Earlier in the week the yield on 10-year Treasurys reached its highest since 2007 and the long bond 30-year Treasury yield saw its highest since 2011.

The Latest from @CeteraIM

QTD Sector Review

Cetera CIO Speaks

New Home Sales Climb

Economic Calendar

Monday, August 28
No Major Releases.

Tuesday, August 29
Case-Shiller Home Prices, Job Openings, Consumer Confidence.

Wednesday, August 30
Mortgage Activity, ADP Private Payrolls, 2Q GDP Revision, Goods-Only Trade Balance, Retail/Wholesale Inventories, Pending Home Sales.

Thursday, August 31
Jobless Claims, Personal Incomes/Outlays, PCE Index, Chicago Business Barometer.

Friday, September 1
Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, ISM Mfg, Construction Spending.

Valuations for large cap stocks remain historically elevated compared to small cap stocks. Over the last 20 years, the S&P 500 index (large caps) has an average valuation premium of 1.1 versus the S&P 600 Index (small caps). The premium is currently 1.7. Small cap indices have lagged large caps in recent years, but cheaper valuations could provide a better outlook in the years ahead.

^{This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.}

^{About Cetera® Investment Management
Cetera Investment Management LLC is an SEC registered investment adviser owned by Cetera Financial Group®. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.}

^{About Cetera Financial Group
“Cetera Financial Group” refers to the network of independent retail firms encompassing, among others, Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC (marketed as Cetera Financial Institutions or Cetera Investors), and Cetera Financial Specialists LLC. All firms are members FINRA / SIPC. Located at 655 W. Broadway, 11th Floor, San Diego, CA  92101.}

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^{No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The opinions expressed are as of the date published and may change without notice. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision.}

^{All economic and performance information is historical and not indicative of future results. Investors cannot directly invest in unmanaged indices. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.}

^Glossary

^{The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.} 

^{The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.} 

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.} 

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.} 

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.} 

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership.} 

^{The Bloomberg US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings have a fluctuating average life of around 8.25 years.} 

^{The Bloomberg US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years.} 

^{The Bloomberg US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity.} 

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.} 

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.} 

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity. No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index.}

 ^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.}

 ^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.}

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000.}