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Although markets have performed well this year, some investors may be nervous about upcoming events such as the presidential election, the Fed's next rate decision, and the state of the economy. Along with the uncertainty of the past few years, it's no wonder that gold prices have also risen to record levels above $2,600 per ounce.
Oil prices play a vital role in the global economy, directly influencing the cost of gasoline at the pump and indirectly impacting the prices of all goods and services. Further, since oil is primarily priced in and trade settled in dollars (often referred to as the Petro-Dollar system), oil prices are strongly linked to the U.S. dollar's value in the foreign exchange markets.
As we begin the final quarter of the year, financial markets and the economy have defied many investors' expectations. Rather than falling into recession, the economy has grown steadily, albeit at a slower pace, and inflation rates have fallen toward the Fed's target.
The conflict between Israel and Hezbollah has escalated in recent days, raising the risk of a full-scale war and marking another chapter in Middle East instability. These events are unfolding against a backdrop of existing global uncertainty.
The Federal Reserve's interest rate decisions remain a focal point for markets that are currently anticipating emergency-style rate cuts, which have been pushing down treasury bond yields and boosting equities from their mid-summer lows. Both the S&P 500 and Nasdaq 100 have recovered ~8% since early August, with the former back hovering just below all-time highs.
With less than two months until the presidential election, the policy platforms for President Donald Trump and Vice President Kamala Harris are gradually forming. Through speeches and debates, each candidate is laying out what they stand for and how they would change existing policies.
As everyone settles into their post-Labor Day routines, it's a good time for investors to reflect on markets and review their financial plans for the rest of the year. August began with the sharpest market declines in two years, but major indices have rebounded with the S&P 500 only a fraction of a percent from its all-time high.
Financial markets have been resilient in recent weeks, almost entirely recovering from the swings experienced at the beginning of August. Major stock market indices are approaching all-time highs again, with the S&P 500 gaining 19.2% year-to-date with dividends, less than half of one percent below its peak.
As with many things in life, knowing what we're supposed to do and actually doing it are two separate things. This is true for our health, relationships, careers, and of course, our finances. When it comes to investing, it's well known that properly diversifying and staying invested are the best ways to achieve long-term financial goals.
Global capital markets have felt more fragile recently, with investors concerned about the economy, the possibility that the Fed may be behind on cutting rates, and some disappointing tech earnings. Ironically, despite the market volatility last week, major indices were mostly unchanged from Monday to Friday.