Equity markets closed out a strong summer with another positive month across the board.
The S&P 500 advanced +2% for the second consecutive month and is now up +10.8% for 2025.
Smaller company stocks surged +7% in August, with the Russell 2000 Index now also up +7% for the year after being flat through the first seven months.
International stocks added +3.5% this month as the MSCI ACWI ex-US Index continues to lead global equities at +22% on the year.
Bond markets rallied in August, with bond markets cheering the news out of the Fed’s annual Jackson Hole summit where Jerome Powell indicated that rate cuts may be warranted heading into year-end. The Bloomberg Aggregate Bond Index gained +1.2% for the month and has gained +5% for 2025.
Commodity markets ticked higher, with the Bloomberg Commodity Index adding +2% in August (+7% year-to-date).
Our proprietary Three Dials allocation framework was unchanged during the month of August, as we outline below:
- Market Sentiment and Momentum: (Positive)
The recent broad-based rally has now put all equity indexes across size and geography comfortably above their long-term moving averages for the first time this year, a welcome shift away from the US tech-driven market environment.
While September has historically been the toughest month for stock performance, markets appear well-positioned for a strong run into year-end, leaving our Momentum Dial in a Positive position.
- Economic Fundamentals: (Negative ❌)
After the US economy added just 73,000 jobs in July, economists are anticipating a meager 75,000 additional jobs for August, likely the primary reason that the Fed has telegraphed a rate cut later this month.
Job-related uncertainty has dampened consumer spending, which for the first time in history has been outstripped by technology-related corporate infrastructure spending. On balance, our Fundamental Dial remains in a Negative position.
- Valuation: (Negative ❌)
Despite a strong Q2 earnings season where corporate profit growth more than doubled expectations, equities have only gotten more expensive on a price-to-earnings basis as investors continue to pull forward future earnings growth into current price appreciation. As such, our Valuation Dial remains Negative.
On balance, our composite positioning remains somewhat defensive, with one dial in a Positive position but two dials remaining Negative.
Sources: Morningstar
Disclaimer: Our intent in providing this material is purely for informational purposes, as of the date hereof, and may be subject to change without notice. This article does not intend to constitute accounting, legal, tax, or other professional advice. Visitors and readers should not act upon the content or information found here without first seeking appropriate advice from a trusted accountant, financial planner, lawyer or other professional.
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