MARKET Insights

The month can be characterized by a resilient U.S. economy, marked by strong consumer spending, cooling inflation, and the beginning of monetary policy easing. The stock market was influenced by robust business investment and ongoing geopolitical concerns, while the bond market reacted to shifts in Federal Reserve policy and changing inflation expectations.

After months of anticipation, the Federal Open Market Committee (FOMC) voted to cut interest rates by 50 basis points. This led to a dramatic shift in the yield curve, prompting the markets to speculate about the FOMC's next moves. Additionally, the Bank of Canada and the European Central Bank also continued to lower their rates. Significant disparities in global interest rates could affect currency exchange rates and potentially create further inflationary pressures.

Stock markets experienced a dip in the first week but rebounded for the remainder of the month, with the Dow and S&P 500 reaching all-time highs. All major indices ended the month higher.

The Inflation Reduction Act and CHIPS and Science Act continued to drive infrastructure, machinery, and equipment investments. Companies also maintained substantial software and intellectual property investments, particularly in artificial intelligence. Furthermore, month-over-month inflation numbers are showing annualized rates that should help lower the yearly inflation figure. If next month's inflation rate is 0.2% or less, the annualized inflation rate is expected to drop to around 2.3%.

As bond yields declined, total returns in fixed income were also positive for the month, with several areas of the fixed income market reaching year-to-date highs.

Source: Invesco Distributors, Inc.

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