You're not the only one confused about where the economy is headed. Just look at the stock market, where confused investors sent shares on a wild ride in August.
And there could be much more where it came from. Two notoriously volatile months for equities are just ahead.
Shares around the world jumped Friday to face another incredible week. Investors have usually tried to dismiss their predictions of President Donald Trump's trade war and declining economies around the world will draw the US into a recession. In the US, the result was a week where the Dow Jones Industrial Average had four days where it rose or fell by more than 300 points – with an 800-point fall thrown into the mix.
On Friday, the S&P 500 rose 1
Stocks, bonds and other investments grew up and down throughout the week, with concerns that hit a crescendo on Wednesday when a fairly reliable recession warning signal reversed in the US Treasury market.
Friday marked the seventh time in the last ten days that the S&P 500 fluctuated by at least 1%, something that has not happened since the end of 2018, the first time investors became worried about a possible recession. At that time, they were worried about raising interest rates along with the trade war.
Don't expect volatility to disappear anytime soon, analysts say. No one knows when Trump's trade war will find a resolution, nor whether all the uncertainty it creates will drive enough companies and shoppers to keep up with spending and cause a recession. Some investors are digging to keep trading tensions up to the 2020 elections.
"We are also entering a tough season for the market," said Emily Roland, co-chief investment strategist at John Hancock Investment Management. “September and October tend to be the most volatile of the year for markets. We have talked to investors for that reason to look for areas to cut risks within a portfolio. ”
The S&P 500 has lost an average of 1.1% in September over the past 20 years, making it the worst month. year. October's track record is better, but it includes the worst monthly trend in that stretch, down nearly 17% in 2008.
But Roland and other professional investors also warn that this type of concern really is normal for the market when you look at it from a very long-term perspective. The US stock market has historically had such bursts of tightly packed volatile days, one another between longer periods of calm. Since the beginning of 2009, when the S&P 500 has dropped by 3% in one day, either preceded or followed another such fall within a month of 70% of the time.
"What has been abnormal is the super-low volatility" that investors have enjoyed much of this bull market, which began in 2009, said Brian Yacktman, portfolio manager for the YCG Enhanced Fund.
He sees volatility as an opportunity to buy shares at cheaper prices, and he has recently been partial to bank stocks, which have been hampered by concerns that lower interest rates will hurt their profits.
"When you have volatility like this, you actually buy the market on sale," said Rob Scheinerman, CEO of AIG Retirement Services. "It's an amazing thing."
Technology companies and banks did the most to drive Friday's broad rally when investors regained some appetite for riskier holdings. Tools, which has been one of the safer haven for investors this month, released the market.
The S&P 500 rose 41.08 points, or 1.4%, to 2,888.68. Dow, which dropped 800 points earlier this week, adds 306.62 points, or 1.2%, to 25,886.01. The Nasdaq climbed 129.38 points, or 1.7%, to 7,895.99.
Investors favored smaller corporate shares, which pushed up Russell 2000. The index rose 31.99 points, or 2.2%, to 1,493.64.
Even with the latest turbulent trading facility, the S&P 500 still has a good year. The broad market index increased by 15.2% for 2019. Similarly, Nasdaq is still up 19% for the year.
Long-term bond yields also rose on Friday. The return on the 10-year Treasury rose to 1.56% from 1.52% late on Thursday.
The return on returns followed a week-long picture that included a sharp fall on Wednesday that rang yet another alarm bell for the economy. The 10-year Treasury return fell below the return on the two-year Treasury, a rare event and one that has historically suggested a recession may be a year or two away.
Investors hope that the Federal Reserve will continue to cut interest rates to boost economic growth. The central bank lowered interest rates by one quarter at its most recent meeting. It was the first time it had lowered prices in a decade.
Benchmark crude oil rose by 40 cents to settle at $ 54.87 per barrel. Brent crude, the international standard, rose 41 cents to close at $ 58.64 a barrel. Gasoline wholesale rose 2 cents to $ 1.66 per gallon. Heat oil remained unchanged at $ 1.81 per gallon. Natural gas fell 3 cents to $ 2.20 per 1,000 cubic feet.
Gold fell $ 7.10 to $ 1,512.50 per ounce, silver fell 9 cents to $ 17.10 per ounce, and copper remained unchanged to $ 2.59 per pound.
The dollar rose to 106.29 Japanese yen from 106.11 yen on Thursday. The euro weakened to $ 1.1093 from $ 1.1107.
AP Business Writer Damian J. Troise contributed.