Week in Review: 29 Jul-2 Aug 2024 - RECESSION FEARS, RISK OFF, VIX UP, JOBS SURPRISE ON THE DOWNSIDE

Introduction

For the week of July 29 to August 2, 2024, stock market performance showed a negative trend for the third consecutive week. The S&P 500 experienced a decline of 2.1%, while the NASDAQ 100 fell 3.1%. Both indices are now approaching near-term support levels, but they may experience an additional drop of around 1% in the coming week. The Russell 2000 index notably plunged by 7.22%, indicating that investors are not merely rotating funds within the stock market; instead, they are opting to cash out entirely, seeking the relative safety of cash and bonds.

The current stock market selloff has enriched gold, which rallied 2.3% this week and may test the $ 2,500 threshold soon. Silver also saw a recovery of 2.2%, although it seems weaker compared to gold; however, it may stabilize around the $ 28 per ounce mark in the near term.

In the commodities sector, the price of West Texas Intermediate (WTI) crude oil dropped 4.7%, stabilizing around $ 73 to $ 74 per barrel. WTI has been trending within a narrowing range, suggesting that a significant price movement—either above $ 82 or below $ 72—could occur in August.

Cryptocurrency, particularly Bitcoin, took a substantial hit this week, falling 11% to approximately $ 61,000. As a volatile asset with limited utility, Bitcoin could face significant outflows if equity markets and overall liquidity remain distressed. The current support levels for Bitcoin appear to be around $ 60,000 and $ 53,000.

The relative strength of the US dollar (DXY) decreased, reaching the lower end of its trading range since April 2024. This decline may be linked to anticipated Federal Reserve rate cuts expected to commence in September. If the DXY continues its downward trend, the next support level may be around 101.

Financial conditions remain relatively loose; however, this trend could reverse if the stock market’s downturn persists. In June, the US M2 money supply increased by 0.3%. Meanwhile, US bond yields dropped significantly this week, with the 2-year yield at 3.89% and the 10-year yield at 3.79%.

Amidst the backdrop of a potential recession, Friday proved particularly negative for the main US stock market indices, exacerbated by disappointing non-farm payroll numbers. The US economy added only 114,000 jobs in July—well below the revised June figure of 179,000 and forecasts of 175,000. This marks the lowest level of job creation in three months and is below the average monthly gain over the previous year, suggesting a cooling labor market.

Should forthcoming unemployment and GDP data also underperform expectations, this might serve as confirmation of an impending recession. The prospect of Fed rate cuts is now a topic of discussion, prompting a shift from equities to bonds. Precious metals typically gain from recession fears; however, if a recession becomes confirmed, metals could also see a decline, making cash a more favorable asset.

When markets reach their lowest points, historically, this is considered an opportune time for investment—be it in stocks, real estate, cars, or other assets. The coming 12 to 18 months are likely to present numerous investment opportunities.

Keywords

• Stock Market
• S&P 500
• NASDAQ 100
• Russell 2000
• Gold
• Silver
• WTI Crude Oil
• Bitcoin
• US Dollar
• Federal Reserve
• Non-Farm Payrolls
• Employment Data
• Recession

FAQ

1. What were the stock market trends for the week of July 29 to August 2, 2024?
The S&P 500 lost 2.1%, the NASDAQ 100 fell by 3.1%, and the Russell 2000 was down by 7.22%. These declines indicate a risk-off sentiment among investors.

2. How did gold and silver perform during this period?
Gold rose by 2.3%, approaching the $ 2,500 level, while silver recovered by 2.2% and may stabilize around $ 28 per ounce.

3. What happened to Bitcoin’s price this week?
Bitcoin fell 11%, reducing its price to about $ 61,000, with critical support levels around $ 60,000 and $ 53,000.

4. Why did the US dollar weaken?
The US dollar (DXY) decreased as market expectations shifted toward potential Federal Reserve rate cuts expected to start in September.

5. What implications do the non-farm payroll numbers have on the economy?
The US economy added only 114,000 jobs in July, indicating a slowing labor market, which raises concerns over a potential recession if subsequent economic data underperform.