What a difference between the optimism of July versus the reversal of August. The optimism was based on hope - the hope that the Fed would not have the resolve to continue to fight inflation in the face of a slowing economy. The market peaked the week before the Jackson Hole conference and then reset have Chairman Powell's comments. The SPX was down 408 bp in total return terms and has gotten worse since the new month began. Bond markets have not done much better. This has generated the returns for the 60/40 stock bond portfolio to be the worst recorded. There is again no safety with bond diversification.
As we enter the Labor Day holiday we are back where started after the Memorial Day week-end; a stagflation environment with a hawkish Fed. There were trading opportunities, but the global macro story has not changed and the world economy has gotten worse. There is little positive to look forward to in the months before winter.
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