THE WEEK ON WALL STREET
Positive inflation data failed to lift stocks from their August doldrums last week as economic data and a ratings downgrade soured investor sentiment. The Dow Jones Industrial Average added 0.62%, while the S&P 500 slipped 0.31%. The Nasdaq Composite index fell 1.90% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.50%.
FACT OF THE WEEK
President Franklin D. Roosevelt signed into law the Social Security Act on August 14, 1935. Press photographers snapped pictures as FDR, flanked by ranking members of Congress, signed into law the historic act, which guaranteed an income for the unemployed and retirees. FDR commended Congress for what he considered to be a “patriotic” act.
Roosevelt had taken the helm of the country in 1932 in the midst of the Great Depression, the nation’s worst economic crisis. The Social Security Act (SSA) was in keeping with his other “New Deal” programs, including the establishment of the Works Progress Administration and the Civilian Conservation Corps, which attempted to hoist America out of the Great Depression by putting Americans back to work.
In his public statement that day, FDR expressed concern for “young people [who] have come to wonder what would be their lot when they came to old age” as well as those who had employment but no job security. Although he acknowledged that “we can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life,” he hoped the act would prevent senior citizens from ending up impoverished.
Although it was initially created to combat unemployment, Social Security now functions primarily as a powerful safety net for retirees and the disabled. It also provides death benefits to taxpayer dependents. The Social Security system has remained popular and relatively unchanged since 1935.
Tech Weighs On Stocks
Stocks struggled last week, beginning on a strong note ahead of key inflation data and selling off mid-week in response to a downgrade of the banking sector by credit rating agency Moody’s and news of a steep drop in China’s exports. Emblematic of the week, stocks jumped to big gains following Thursday’s better-than-expected inflation report, only to evaporate as bond yields rose amid an auction of 30-year Treasury bonds. Stocks have had difficulty sustaining traction with the loss of the technology’s leadership, which has propelled gains this year. The combination of higher yields and earnings that failed to validate tech's elevated valuations has dragged the sector and the larger market.
July’s inflation data reflected only moderate price pressures. Consumer prices increased by a modest 0.2%, which aligned with market expectations. In comparison, the annual inflation rate came in at 3.2%, slightly below consensus estimates–though higher than June’s annual increase of 3.0%. Core CPI (excludes food and energy) was particularly encouraging, rising at the slowest rate since October 2021. Producer prices painted a more mixed picture, coming in a bit higher than expected, rising 0.3% versus the expected 0.2% increase, though the year-over-year increase was just 0.8%. Core producer prices’ 12-month increase of 2.4% tied for the lowest since January 2021.
FINANCIAL STRATEGY OF THE WEEK
Did you miss the July video: The Future of Social Security? As a nearly 90-year program, I discuss what the future might hold for Social Security. I hope you enjoy it and find it informative.