August is often a slower month for the stock market, but this year it brought a fair amount of volatility. The month started on a downturn after a disappointing jobs report showed that the labor market is slowing faster than expected. In response, all the major indexes moved into negative territory during the first week of August.

 

Mid-month, attention shifted to the Federal Reserve’s annual Jackson Hole meeting. Fed Chair Jerome Powell acknowledged that rising unemployment is now more concerning than inflation. That change in focus opened the door for a potential quarter-point interest rate cut in September, which would bring rates into the 4–4.25% range. Investors currently see about an 85% chance of that happening. Powell summed up the Fed’s new outlook by saying the “balance of risks” between fighting inflation and supporting jobs has shifted.

 

Markets reacted positively to Powell’s comments. Stocks posted one of their strongest days of the year, with the S&P 500, Dow, and Nasdaq all climbing back to or near record highs. Overall, August saw large swings: the Dow moved 1,656 points, the S&P 500 shifted 202 points, and the Nasdaq swung 789 points.

 

By the end of the month, all three indexes were solidly higher:

 

It’s worth noting that we remain in a bull market that began in October 2022. Despite challenges such as inflation, a U.S. credit downgrade, and tariffs, the S&P 500 has risen about 80% since then. Historically, bull markets last around five years and deliver average gains of roughly 160%. In more recent decades, bull markets have lasted even longer—like the 11-year run before the pandemic, when stocks rose 500%.

 

The broader economy also looks resilient. Second-quarter growth was revised up to 3.3%, the fastest pace in nearly a year. Consumer spending improved, inflation eased compared to earlier in 2024, and jobless claims have steadily declined since June.

 

Even so, the market still feels a bit unsettled. Gains on up days have been modest, while losses—especially in technology stocks—have been sharper. With tech making up such a large share of the S&P 500, its swings have a big impact on the overall market.

 

It’s important to remember that the stock market and the economy don’t always move in lock-step. While stocks continue to climb, even The Wall Street Journal recently noted that valuations are now higher than they were during the dot-com boom. On top of that, the rapid adoption of artificial intelligence makes the long-term outlook harder to pin down. For these reasons, a short-term downturn is still possible, even if the long-term picture remains encouraging.

 

Remember to stay steady. Don’t overreact when the market dips, but don’t get carried away by optimism either. Keep your portfolio balanced, think long term; while the waters may get choppy, it’s no reason to jump ship!

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