Bob Graham – Riggs Asset Management Company

Hi there, I’m Bob Graham, President of Riggs Asset Management Company.

Today I want to talk about some of the volatility we’ve recently seen in the markets.

It has been a very interesting period over the past week or so. Several factors are contributing to this volatility, including:

• Actions—or in some cases inaction—by the Federal Reserve

• The election cycle that we’re currently in

• Broader economic developments

All of these elements are combining to create the market environment we’re seeing today.

Before diving into that, I want to step back for a moment and point out something important.

2024 has been a very good year for the stock market and a very good year for the bond market.

Quite frankly, it has also been a very good year for the Riggs team and our clients, and your portfolios continue to perform well.

That said, let’s talk about what’s happening now, where we see potential opportunities, and where we may want to remain cautious.

A Return of Volatility

Since roughly October of last year, markets have experienced very little volatility.

In fact, we hadn’t seen a 2% move up or down in a single day until recently.

Last week, however, we saw markets drop roughly 2%, then rise about 2%, and today we’re seeing another roughly 2% decline.

While spikes in volatility like this are not unusual historically, they can still feel unsettling after such a long period of calm.

So what’s driving it?

Economic Data and Federal Reserve Expectations

One factor is the latest jobs report, which suggested that the economy may be slowing more quickly than many analysts—and perhaps even the Federal Reserve—had expected.

Earlier in the week, the Federal Reserve indicated that the economy appeared to be in a steady state, with the possibility of an interest rate cut around September.

However, the new economic data may lead investors to believe that rate cuts could come sooner or possibly be larger than previously expected.

This uncertainty is contributing to the market’s volatility.

Business Caution During an Election Year

Another factor we’re hearing about comes directly from business leaders.

When we speak with business owners, listen to corporate earnings calls, or hear what CEOs and CFOs are saying, the message is often similar.

Many companies are saying:

“We’re not entirely sure what the policy environment will look like after the election.”

As a result, some businesses are temporarily pulling back on expansion plans.

Instead of launching major new initiatives right now, they’re choosing to maintain operations and wait for more clarity after the election.

Importantly, this appears to be more of a pause than a permanent shift.

Regardless of who wins the election, businesses will still need to grow, invest, and expand once the policy landscape becomes clearer.

Seasonal Market Patterns

There are also seasonal factors at play.

Historically, the first week of August tends to be volatile.

However, the remainder of August is often stronger.

One thing we’ll be watching closely is whether that historical pattern holds this year. If markets fail to stabilize after the early August volatility, we may need to adopt a slightly more cautious approach.

Beyond that, September and October are historically the most volatile months, particularly during closely contested presidential elections.

This is largely because investors are unsure what future policy direction may look like.

Once the election result becomes clear in November, markets often rally strongly regardless of which party wins.

That rally frequently continues into the spring of the following year.

Portfolio Positioning

For now, this scenario represents our base case outlook.

Recently, we’ve also been able to take advantage of opportunities in the bond market.

For example, we have:

• Purchased high-quality U.S. Treasuries

• Extended maturities where appropriate

• Added mortgage-backed securities

These investments have performed well as bond prices have rallied strongly, particularly over the past month and especially during the last week.

As a result, portfolios remain in a strong position.

The stock market, meanwhile, appears to be behaving largely in line with historical election-year patterns.

The main difference is that this is the first real spike in volatility we’ve seen all year.

Looking Ahead

We’re watching these developments closely.

If markets stabilize as expected, we’ll continue to take advantage of opportunities.

If conditions become more uncertain, we may choose to become a bit more cautious.

But at this point, the recent volatility appears to be consistent with a normal election-year market cycle.

If you have any questions about this update, please don’t hesitate to reach out to any member of the Riggs team.

If your advisor isn’t immediately available, any of us would be happy to help answer your questions.

I hope everyone has a great rest of the summer, and we’ll talk again soon.