"You Had Me at Hello!"

Hi There! As we dive into another week together, I want to take a moment to chat about something truly special: kindness. In our busy lives, it’s so easy to forget just how powerful a simple act of kindness can be. I truly believe that kindness always wins. It’s more than just a nice thing to do; it’s a sign of emotional maturity and a beautiful part of being human.

Kindness is priceless. It takes little effort and costs us nothing, yet its value is beyond measure. Lately, I’ve been having some heartwarming conversations about this essential quality. You know, they say you really haven’t lived until you’ve done something for someone who can never repay you. That thought really warms my heart and reminds us that the most meaningful moments often come from our selfless actions.

Every day, we cross paths with people who might be struggling, their worlds feeling like they’re falling apart. How we treat others truly matters. I encourage you to choose kindness whenever you can. Your small gesture could be the light in someone’s darkest moment, and you may never know just how much it means to them.

So, let’s make a promise to ourselves to prioritize kindness this week and beyond. Together, we can spread a little more love and compassion in the world.

Alright, let’s dig in!

Last Week (August 18 - 24, 2024) Recap

Last week, the spotlight was on the Jackson Hole Economic Symposium in Wyoming, where Fed Chair Jerome Powell hinted at potential rate cuts if economic and labour trends continue. U.S. markets posted solid gains, treasury yields fell, and the U.S. dollar slipped as rate cut expectations grew.

U.S. Markets

U.S. stocks advanced last week, buoyed by Powell’s dovish tone at Jackson Hole. The S&P 500 and Nasdaq both climbed 1.1%, while the Dow added 1%. Investors remained focused on the Fed's September meeting, with Powell suggesting that policy adjustments could be on the horizon. Despite a slight dip in August's flash PMI, existing home sales saw modest gains. An unexpected downward revision to nonfarm payrolls (NFP) signaled a weaker labour market, adding to the anticipation of rate cuts. Retail earnings were mixed, with Target beating expectations while Lowe's cut guidance despite strong earnings.

• Fixed Income: The Bloomberg Aggregate Bond Index edged higher as bond yields fell in response to Powell’s speech. The 10-year Treasury yield dropped by eight basis points, and the two-year yield fell by 15 basis points. Market sentiment continues to favour rate cuts, especially after the NFP revision and rising jobless claims.

• Commodities: The Bloomberg Commodities Index rose 0.87%, with oil prices dropping 2.25% after a mid-week sell-off driven by weak U.S. jobs data and concerns over Chinese demand. Gold finished the week flat after a Friday jump, while silver gained over 2%.

Currencies:

• U.S. Dollar: The U.S. dollar weakened on dovish Fed minutes and Powell’s comments. 

• Japanese Yen: The Japanese yen strengthened following hawkish remarks from the Bank of Japan (BoJ), suggesting openness to further rate hikes.

U.S. Economic Recap (August 18 - 24, 2024)

• Powell’s Speech at Jackson Hole: Fed Chair Jerome Powell emphasized an evolving economic landscape, with labour market fragilities at the forefront. He noted that "the time has come for policy to adjust," indicating that rate cuts may be necessary to sustain economic growth.

• Nonfarm Payrolls Revision: A preliminary revision showed a downward adjustment of roughly 800,000 jobs for the 12 months ending in March, highlighting a weaker labour market than initially reported. This revision could prompt a more aggressive rate cut in September.

Global Markets Recap

• Europe: The STOXX 600 gained 1.31%, supported by expectations of ECB rate cuts and strong French PMI data. The EU also revised tariffs on Tesla vehicles, reducing potential tariffs from 20% to 9%.

• Asia: Asian markets saw broad gains, led by Japan's slight CPI increase and stable PMI data. China lagged slightly after the PBOC held loan rates steady, while Hong Kong and India posted solid gains.

Crypto Recap (August 18 - 24, 2024)

• Bitcoin: Bitcoin regained a position above $62,000 after Powell’s dovish speech, signaling possible rate cuts. However, despite testing $65,000 twice, Bitcoin showed signs of potential consolidation around the $62,000-$60,000 range.

• Sony’s Web3 Expansion: Sony Group announced the development of Soneium, an Ethereum Layer-2 network, as part of its broader push into digital assets, signaling its ongoing interest in the blockchain space.

Here are other key highlights from last week:

• AI tokens surged ahead of ‘Super Bowl’ Nvidia earnings report.

• Aave launched on ZkSync-powered Era Mainnet.

• Avalanche became latest blockchain to support money market fund.

• Casio to released 800 NFT sneakers with Move-and-Earn app STEPN GO.

• Polygon Migration: $MATIC to $POL—What You Need to Know.

Get ready for another crazy week in the markets!

Developments so far (August 26 - 31, 2024):

• Monday:

  • Durable Goods Orders: July orders jumped 9.9%, the biggest monthly gain since July 2020.

• Tuesday:

  • Consumer Confidence: August confidence rose to 103.3, the highest since March 2024.

  • S&P Case-Shiller HPI: June house prices increased 6.5% year-over-year.

Upcoming data to watch:

• Thursday:

  • Q2 GDP: Revised estimates expected.

  • Jobless Claims: Weekly claims data.

  • Pending Home Sales: July figures.

• Friday:

  • Core PCE Inflation, Chicago PMI, Consumer Sentiment: Key indicators for inflation and economic health.

Fed Speakers This Week:

• Monday: FOMC Member Daly on Bloomberg TV stated, "The time to adjust policy is upon us," reinforcing expectations for a September rate cut.

• Wednesday:

  • FOMC Member Waller: Speaking on payments at the Global Fintech Festival in Mumbai.

  • FOMC Member Bostic: Discussing the economy at Stanford Black Alumni Association in Atlanta.

• Thursday:

  • FOMC Member Bostic: Presenting at Georgia Tech’s Scheller College of Business in Atlanta.

Earnings Releases:

Key earnings reports expected to influence market sentiment this week are shown below.

Global Economic Events This Week:

• Monday:

  • Germany Ifo Business Climate: Watch for shifts in business sentiment in Europe’s largest economy.

• Tuesday:

  • Australia CPI: Key inflation data, important for the Reserve Bank of Australia’s policy direction.

• Thursday:

  • Germany CPI: Inflation data from Germany could influence ECB policy decisions.

  • SNB Chairman Jordan Speaks: Insights from the Swiss National Bank could impact the Swiss franc.

  • Japan CPI: Japan’s inflation numbers could affect BoJ’s policy stance.

  • Australia Retail Sales: Consumer spending data, a vital indicator of economic health.

• Friday:

  • Euro Area CPI Flash Estimate: Preliminary inflation data for the Eurozone.

  • Canada GDP: Growth data from Canada could influence the Loonie.

  • China PMI (Manufacturing and Non-Manufacturing): Key indicators of China’s economic health.

Trading Tip:

Do not ignore a Double Top and Triple Top Signal on a monthly chart, after a minimum gap of 6 months. This is not the right place for investment or entry, as price may fall!

Week 8/18/24 - 8/24/24 Recap

Special Tools and Strategies

What is Diversification?

Diversification is a strategy that involves spreading your investments across various assets, such as stocks, bonds, and cash, to minimize risk. By holding a variety of investments, your portfolio is less affected by poor performance in any single asset, helping to stabilize returns over time.

Importance of Diversification

Diversification helps manage risk by reducing reliance on one type of investment. It doesn't guarantee higher returns, but it can improve risk-adjusted performance, making it a key strategy for achieving financial goals.

Rebalancing Your Portfolio

Regular rebalancing is essential to maintaining your desired risk level. Over time, certain investments may grow faster than others, causing your portfolio to drift from its target allocation. Rebalancing, ideally done annually or during significant financial changes, helps realign your portfolio with your goals and risk tolerance.

Building a Diversified Portfolio

A diversified portfolio should align with your financial goals, risk tolerance, and time horizon. Within each asset class, further diversify by including different sectors, market caps, and geographic regions for stocks, as well as varying maturities and credit qualities for bonds. For instance, within a stock portfolio, ensure no single stock exceeds a certain percentage (e.g., 5%) and consider including a mix of small, mid, and large-cap stocks across various sectors.

Example of Diversification

The Figure below illustrates the benefits of diversification during market downturns and recoveries. In the 2008–2009 bear market, a diversified portfolio (70% stocks, 25% bonds, 5% short-term investments) limited losses to -35% compared to -49.7% for an all-stock portfolio. During the recovery from 2009 to 2014, the diversified portfolio gained 99.7%, demonstrating a balance between managing risk and capturing market gains. This highlights how diversification can help protect against significant losses while still allowing for substantial growth.

Key Takeaway

Achieving long-term financial goals requires a disciplined approach that involves diversification and regular portfolio rebalancing. By avoiding the temptation to chase market trends and maintaining a balanced strategy, you can better manage risk and enhance the potential for success.

Disclaimer: This newsletter is strictly educational. The information this report provides does not constitute investment, financial, trading, or any other advice. You should not treat any of the report’s content as such. Please be careful and do your research.