Welcome to the July 2024 edition of Ceva Insights – your monthly briefing on the economic landscape. July brought a mix of market performances, shaped by evolving economic data and significant central bank actions. In this edition, we explore the key financial developments of the month, including insights into equities, fixed income, and real estate markets. Whether you’re a seasoned investor or just getting started, our goal is to provide clear and actionable information to help you navigate the current financial landscape.
Key Highlights: Navigating July of 2024
Economic Overview: July 2024 saw a slowing U.S. economy with GDP growth revised down to 1.7% and core CPI slowing to 0.2%. The Fed held rates steady, while the ECB cut rates by 25 bps to 3.75% amidst ongoing uncertainties.
Equities: The S&P 500 gained 1.2%, driven by resilience in market conditions, while the Russell 2000 surged 10.2% as investors rotated towards small-cap stocks amid rate cut expectations.
Fixed Income: The 10-year Treasury yield fell from 4.40% to 4.16%, with both Treasury and credit spreads reflecting shifting economic expectations.
Real Estate: Median home prices fell to $439,950, marking the first seasonal decline in a peak sales month as higher mortgage rates slowed market activity. Inventory rose by 36.6% year-over-year, providing more options for buyers.
Economic Overview
July 2024 presented a complex economic landscape influenced by mixed signals in inflation and growth. The U.S. economy showed signs of deceleration, with the GDP growth rate revised downward to 1.7%, a significant drop from the previous month’s estimate of 2.2%. Core CPI came in lower than expected at 0.2%, suggesting potential easing of inflationary pressures. The Federal Reserve maintained its cautious stance, holding interest rates steady for July, while the European Central Bank (ECB) reduced its deposit rate by 25 basis points to 3.75% in response to ongoing economic uncertainties . All eyes will be on the September Fed meeting as investors anticipate a rate cut in the face of higher unemployment numbers and softer inflation.
Central Banks: Fed held rates steady; ECB cut rates by 25 bps to 3.75%.
GDP Growth: U.S. GDP growth revised down to 1.7% as signs of deceleration emerged.
Inflation: Core CPI slowed to 0.2%, below expectations, signaling easing inflation pressures.
Equities
In July 2024, equity markets experienced a mix of gains and corrections, reflecting broader economic uncertainties and investor sentiment. The S&P 500 started strong, reaching new record highs mid-month but ended July with a modest gain of 1.2%. This performance highlighted the market’s resilience despite economic fluctuations. A notable rotation towards small-cap stocks, represented by the Russell 2000, occurred as investors shifted focus from mega-caps to smaller companies. This rotation was primarily driven by growing expectations of potential interest rate decreases by the Federal Reserve, which favored the growth prospects of smaller, more domestically focused companies.
The month also saw significant volatility as investors grappled with the long-term impact of AI on various sectors and the uncertainty surrounding the speed at which the Fed might cut rates. These factors contributed to fluctuating market conditions, emphasizing the importance of careful analysis and strategic positioning.
S&P 500: Gained 1.2%, reflecting resilience amid economic uncertainties.
Small Caps: Russell 2000 surged 10.2%, showing strong rotation from larger to smaller companies driven by rate cut expectations.
Fixed Income
The fixed income market in July 2024 was marked by volatility, influenced by changing expectations of monetary policy. U.S. Treasuries saw the 10-year yield decline from 4.40% to 4.16% by mid-month, driven by growing anticipation of potential Fed rate cuts.
Both the Treasury spread and credit spreads exhibited notable shifts. The Treasury spread decreased, signaling investor expectations of slower economic growth or future rate cuts. Meanwhile, credit spreads narrowed mid-month on optimism about rate cuts but widened again towards the end of July as inflation concerns resurfaced, reflecting fluctuating risk sentiment in the market.
Treasury Yields: The 10-year Treasury yield fell from 4.40% to 4.16%.
Credit Spreads: Widened slightly, reflecting ongoing inflation concerns
Real Estate
In July 2024, the residential real estate market experienced notable changes. Median home prices fell for the first time during a peak sales month, dropping from $445,000 in June to $439,950. This decline was driven by a sluggish market, as buyers and sellers awaited better economic conditions. Mortgage rates fell to their lowest since March, leading some buyers to delay purchases in hopes of further rate cuts. Additionally, inventory increased, with a 36.6% rise in homes for sale year-over-year, providing more options for buyers despite the slower market.
Closing Remarks
July 2024 underscored the importance of staying informed and adaptable in a market shaped by economic uncertainties and shifting central bank policies. As we’ve seen across equities, fixed income, and real estate, market dynamics continue to evolve, requiring careful attention to diversification and strategic planning.
Our goal is to provide you with a clear understanding of these developments, empowering you to make informed decisions. We look forward to offering further insights and updates in future editions. Thank you for joining us in this comprehensive review of the July 2024 financial landscape.
Allen, Henry and Jim Reid. “July 2024 Performance Review.” Deutsche Bank Research, August 1, 2024
Goodman, David. “5 Things You Need to Know to Start Your Day: July 1 – July 31, 2024 Series.” Bloomberg, July 1 – July 31, 2024.
IMPORTANT DISCLOSURE: The information contained in this report is informational and intended solely to provide educational content to our clients and other readers that we find relevant and interesting. Opinions expressed are just that, and are current only as of the data of publication Nothing in this document should be construed as investment advice; we provide advice on an individualized basis only after understanding your circumstances and needs. The information presented in this newsletter is based on reports from Deutsche Bank and Bloomberg’s ‘5 Things You Need to Know to Start Your Day’ series. Data provided comes from sources we believe are reliable, but accuracy is not guaranteed. Discussion of sectors and the performance of region-specific equities and bonds generally refers to market indices. We use the S&P 500 to represent US large-cap; the Willshire Small Cap to represent US small-cap; the MSCI ACWI ex US to represent international equities; the US 10-year Treasury Yield to represent US Treasuries; the ICE BofA European Government Bond Index to represent European bonds; the ICE BofA US Corporate Index Effective Yield to represent investment-grade bonds; the ICE BofA US High Yield Index Effective Yield to represent high-yield bonds. Indices are unmanaged, are not subject to investment management fees or transaction costs, and it is not possible to invest in an index. Index performance can provide general information about how a particular region or investment has performed, but does not provide information about the performance of Ceva’s client portfolios. Actual client performance may differ materially from the index performance discussed. Past performance is not a guarantee of future results. Financial planning is a tool that can help clients consider different current and future scenarios and construct portfolios designed to meet specific goals and address specific risks. Financial planning does not guarantee a positive outcome or prevent loss. It’s important to revisit financial plans and the underlying assumptions of those plans regularly, and to make adjustments as needed to respond to changing circumstances.
