Fed Rate Cuts Give Higher Probability of the Great Rotation Occurring

Despite pullbacks and elevated volatility in the earlier days of the month, major equity indices were up in August amid easing inflation, a dovish change in monetary policy, and increased probabilities of a soft landing. The S&P 500 gained 2.4% for the month while the Dow Jones Industrial Average was up 2.0%, posting a new all-time high, and the Nasdaq Composite followed with an increase of 0.7%. US value stocks (+3.0%) were among the best performers, followed by international developed equities (+2.9%) and US large-caps (+2.3%). Bonds fared well as investment grade corporates rose 1.8%, high yield credits gained 1.6%, and the US Aggregate Bond Index increased 1.5%. Aside from gold (+2.1%), commodities struggled as crude oil was down 4.4%, broad-based commodities declined 0.2%, and silver fell 0.2%.