Financial Market Roundup
Produced by Fifth Third's Investment Management Group

In the following piece, Fifth Third's Investment Management Group recaps the market and how it reacted to various events in the month of August.


The Federal Open Market Committee (FOMC) last met on July 26th and increased their policy rates 25 basis points leaving their target range at 5.25%-5.50%. At the July 26th press conference Fed Chair Jerome Powell stated that: “Inflation remains well above our longer-run goal of 2%” and that “… the process of getting inflation back down to 2% has a long way to go.” This past month, Fed Chair Powell spoke at the Jackson Hole Economic Symposium and reiterated this view: “Although inflation has moved down from its peak – a welcome development – it remains too high. We are prepared to raise rates further if appropriate…” As of the end of August, market participants continue to believe we have likely hit peak interest rates with prospective cuts coming in the first half of 2024.

The European Central Bank (ECB) last met on July 27th and increased interest rates by 25 basis points. In their subsequent press release it was noted that: “The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to the 2% medium-term target.” At the end of August, markets continue to expect another 25-basis point hike for 2023 from the ECB.


Global equities were lower in August. Domestically, in the S&P 500, Energy was the only sector that posted positive returns with all other sectors retreating over the month. Specifically, Consumer Staples and Utilities fell the most.

Second quarter 2023 earnings season continues to wrap up, with only a couple companies in the S&P 500 yet to report their financial results as of the end of August. Overall, earnings results were through expectations in all sectors of the S&P 500; however, earnings growth continues to be negative relative to the prior earnings season.

The S&P 500 Index fell by 1.6% in August. The blue-chip Dow Jones Industrial Average fell by 2.0%. The tech heavy NASDAQ Composite fell by 2.1%. International stocks were also lower with the MSCI All Country World Index of developing and developed market stocks falling 2.8% in August. The MSCI Emerging Market Index plummeted by 6.2% in August. The MSCI EAFE Index of developed international equities fell by 3.8% in August.


On July 27th, second quarter U.S. GDP was reported, detailing quarter-over-quarter economic expansion of 2.4%, but was revised lower on August 30th to 2.1%, above consensus estimates of 1.8%. The strong report was supported by continued strong personal consumption metrics.

In June, the Fed released its Summary of Economic Projections which details the central bank’s outlook on a variety of prospective economic measures. Specifically, investors digested improved projections on GDP and Unemployment for year-end 2023.

During the month of August term points in the U.S. Treasury curve moved mostly higher. At August month-end, the U.S. Treasury 2-year yield fell 1 basis point to 4.86% with the 10-year rising 15 basis points to 4.11%. The results of these changes netted a slightly less inverted curve with the 2/10 inversion contracting to 75 basis points.

Mortgage Rates moved higher in July as the Freddie Mac 30-year Primary Mortgage Market Survey rose to 7.18% on August 31st up 37 basis points from July 27th.