This Weekly Financial Markets Update reviews the top market headlines: Shelter Costs Weigh on Inflation Readings, Small Business Optimism Fades in August, Yield Curve “Uninverts”
  • The Consumer Price Index rose 2.5% on an annual basis in August
  • The Small Business Optimism Index fell to 91.2 in August
  • The 10-year to 2-year Treasury bond spread ended last week at 0.08%

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Top Three Market Headlines

Shelter Costs Weigh on Inflation Readings: The U.S. Department of Labor reported last week that the Consumer Price Index (CPI) rose 0.2% in August, comparable to the pace seen in July. On a year-over-year basis, the CPI was up 2.5%, down from a 2.9% pace in July and the lowest annual rate since February 2021. "Core" CPI, which excludes food and energy items, increased 0.3% in August, a slight uptick from 0.2% in July; versus last year, the core rate was up 3.2%, unchanged from July's pace. Shelter costs remain a key driver of ongoing pressures on the CPI, rising 0.5% in August and 5.2% on an annual basis.

Small Business Optimism Fades in August: After hitting a 2 ½ year high in July, The National Federation of Independent Business (NFIB) Small Business Optimism Index retreated in August. Dropping to 91.2, the index remained below the 50-year historical average of 98 for the 32nd consecutive month. According to the report, inflation remains the leading concern among small business owners, with 24% citing it as the main issue in operating their business. Behind inflation, labor quality was marked by 21% of business owners as their top concern.

Yield Curve "Uninverts": The 10-year/2-year Treasury bond yield spread, measuring the excess market yield of a 10-year Treasury bond versus a 2-year Treasury note, turned positive in recent weeks for the first time in more than two years. In July 2022, shortly after the Federal Reserve began raising the federal funds rate, the 2-year note yield rose above that of the 10-year bond, creating a so-called "inverted" yield curve, a condition closely watched by market participants as a potential indicator of a looming recession. While yields on both bonds have declined since April of this year, the 2-year note has fallen faster as the market prices in expected interest rate cuts by the Federal Reserve.

As of September 13, 2024 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 3.07% 3.42% 15.10% 23.62%
S&P 500 4.06% 3.33% 19.13% 27.80%
Russell 2000 4.39% 6.86% 8.71% 20.35%
MSCI EAFE 1.21% 4.53% 10.11% 19.01%
MSCI Emerging Markets 0.79% 0.42% 7.94% 13.94%
FTSE NAREIT Equity 3.94% 16.60% 16.44% 28.48%
Bloomberg Commodity 2.73% -3.71% 1.25% -5.12%
Bloomberg U.S. Aggregate 0.51% 5.68% 4.93% 10.00%

NFIB 9/10/2024, U.S. Dept. of Labor 9/11/2024, WSJ 9/06/2024, FRED 9/13/2024, FactSet. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.