Prime ETF Tales of August

U.S. shares closed the month of August with features as optimism grew round potential Federal Reserve charge cuts following a positive inflation report. The Dow Jones Industrial Common rose 0.9% final week and 4.6% previously month (as of Aug. 30, 2024). The S&P 500 superior 0.2% final week and 5.7% previously month whereas the Nasdaq Composite misplaced 0.9% final week and delivered a month-to-month return of 5.6%.

Tech Sector Stays Risky

The tech sector wavered in early August on cues of delayed return-on-investments on tech biggies’ enormous synthetic intelligence (AI) investments. Traders additionally reacted to NVIDIA’s (NVDA) earnings, which reported a beat on each strains however got here up with largely in-line forecasts. Traders sought extra optimism from the AI king NVIDIA.

The AI behemoth’s subdued efficiency resulted in a loss for the Nasdaq Composite final week regardless of its late-week restoration. General, the essential tech ETF XLK gained 4.6% in August regardless of volatility (learn: Cybersecurity ETFs Won in August Despite Tech Volatility).

Dovish Fed Coverage Outlook

The Federal Reserve carefully screens PCE inflation ranges to gauge the necessity for rate of interest changes. Following Chairman Jerome Powell’s current remarks signaling a forthcoming charge lower in September, market expectations for a 0.5% charge lower have elevated, although a 0.25% lower stays a risk resulting from regular worth pressures noticed in July.

No marvel, FolioBeyond Different Revenue and Curiosity Price Hedged ETF RISR — which seeks to offer diversification advantages and helps to handle threat from rate of interest volatility — was off 0.3% final month. iShares 20+ Yr Treasury Bond ETF TLT, which fares higher in a falling charge surroundings, gained about 1.2% in August.

Gold bullion ETF SPDR Gold Belief GLD, which is one other beneficiary of the Fed charge lower, gained 2.4% in August. That is very true on condition that Invesco DB US Greenback Index Bullish Fund UUP misplaced 2% final month and gold features if the U.S. greenback falls (learn: U.S. Dollar to Drop Ahead? ETFs to Gain/Lose).

U.S. Financial system in Advantageous Fettle

The U.S. financial system grew in Q2 at a wholesome 3% annual tempo, fueled by sturdy client spending and enterprise funding. Client spending, which makes about 70% of U.S. financial exercise, elevated at a 2.9% annual charge final quarter, up from 2.3% within the authorities’s preliminary estimate, as quoted on CNBC. The second-quarter development marked a pointy acceleration from a lackluster 1.4% development charge within the first three months of 2024.

Blended Alerts in Retail: Are U.S. Customers Resilient?

Retail gross sales in the US gained 1% sequentially in July 2024, following a downwardly revised 0.2% drop in June and method higher than forecasts of a 0.3% achieve. It marked the largest enhance since January 2023 (learn: Retail Sales Gains in July: ETFs & Stocks to Play).

In late August, Walmart WMT supplied a reassuring message to traders involved about U.S. shoppers’ well being. CFO John David Rainey acknowledged that Walmart’s prospects had been making deliberate decisions, downplaying broader financial issues by asserting, “We’re not seeing it,” as quoted on Yahoo Finance.

Nonetheless, current earnings reviews from main retail gamers paint a extra unsure image. Firms like Greenback Basic DG, Lululemon LULU, Abercrombie & Fitch ANF and Ulta Magnificence ULTA confronted combined market reactions after expressing warning concerning the total spending surroundings.

This put deal with client ETFs like Client Discretionary Choose Sector SPDR ETF XLY (which was up about 2.3% in August) and Client Staples Choose Sector SPDR Fund XLP (up about 5% in August). Traders ought to be aware that XLY ETF is heavy on Amazon AMZN, which misplaced 3% in August whereas XLP ETF is heavy on Walmart (which is up 10.7% in August) and Procter & Gamble PG (up 3.5% in August).