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Weekly NewsletterAugust 5, 2024

This Week on Wall Street – Week of August 5th

Further selling continued on Monday on weaker economic data stoking recession fears, the Yen carry trade unwind, and mega-cap profit taking.

This Week on Wall Street – Week of August 5th

Further selling continued on Monday on weaker economic data stoking recession fears, the Yen carry trade unwind, and mega-cap profit taking.

Market Commentary

Further selling continued on Monday on weaker economic data stoking recession fears, the Yen carry trade unwind, and mega-cap profit taking.

Fears of recession were a large culprit in last week’s selloff after we saw a disappointing jobs report. Adding to fears was the thought the Fed could be behind in cutting rates to stave off a larger economic slowdown. Globally, the unwind of the popular Yen carry trade is adding fuel to the fire. The VIX, or the market’s volatility gauge, has spiked from 20 to 40 over the course of a few trading days. This implies that daily moves can be outsized to both the upside and downside over the course of the week.

With traders pricing in an acceleration in Fed rate cuts, the yield curve, which has been inverted most of the time since the Fed began its hiking cycle in March 2022, is nearly uninverted. The curve has steepened by nearly 50bps in one month. History says that the disinversion of the yield curve may mean the economy could be entering a recession.

This week, economic data releases are sparse. This morning we got a read on the service side of the economy. It showed improvement, helping to provide small relief to the sell-off in equities as yields also increased. The data came in much better than anticipated as the gauge moved up from 51.4 vs. the expectation of 50.9. The latest read also moved the gauge out of contraction territory.

With Newton models favoring a risk-off sentiment and volatility extremely elevated, sifting through the noise and focusing on signals will be imperative over the weeks ahead. We will likely see larger-than-normal moves in both equity and bond markets. Momentum in equity markets is still damaged and tactical traders will be looking for readings of exhaustion to the downside before putting more money to work. Defensive areas and interest rate-sensitive areas of the market are showing better readings. Real Estate and Utilities are leading while Energy, Technology, and Materials are lagging. The near-term challenges of the market will continue to be watched closely and time will tell whether this new trend will prevail or if the previous regime reasserts itself.

Economic Releases This Week

Monday: ISM Services

Tuesday: US Trade Deficit

Wednesday: Consumer Credit

Thursday: Richmond Fed President Barkin Speaks, Initial Jobless Claims

Friday: None Scheduled

Stories to Start the Week

Chipmaker Intel plans to cut 15,000 jobs or 15% of its workforce as it tries to compete with its more successful rivals.

Warren Buffett’s Berkshire Hathaway sold nearly half its stake in Apple. It still remains their largest stock stake by far.

Noah Lyles won the 100-meter gold in a thrilling photo finish.

Vice President Kamala Harris is interviewing half a dozen potential running mates ahead of a formal announcement this week. Shapiro and Kelly are viewed as the front runners.

What is Newton?

What is Newton?

Our Newton model attempts to determine the highest probability of future price direction by using advanced algorithmic and high-order mathematical techniques on the current market environment to identify trends in underlying security prices. The Newton model scores securities over multiple time periods on a scale of 0-20 with 0 being the worst and 20 being the best possible score.

Trend & level both matter. For example, a name that moves from an 18 to a 16 would signal a strong level yet slight exhaustion in the trend.

Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.

About This Series

Last Week on Wall Street

Last Week on Wall Street is Waterloo Capital's weekly market recap, published every Monday morning to keep advisors and clients informed on the most significant developments from the prior trading week. Each edition synthesizes equity market performance, fixed income moves, macroeconomic data releases, and notable corporate earnings into a concise, actionable read — cutting through the noise so our readers can focus on what actually matters for long-term wealth management.

Our research team tracks the S&P 500, Dow Jones Industrial Average, NASDAQ Composite, and 10-year Treasury yield as primary benchmarks, while also covering sector rotations, commodity swings, and policy shifts from the Federal Reserve and Washington. When major cross-asset moves occur — such as the historic gold selloff covered in this edition — we dig into the mechanics and the likely ripple effects on diversified portfolios, helping clients contextualize volatility without reacting impulsively.

Our Research Approach

Evidence-Based Perspective for Long-Term Investors

Waterloo Capital's investment research is grounded in fundamental analysis and long-term thinking. We believe that disciplined, evidence-based investing — anchored in each client's specific goals, risk tolerance, and time horizon — consistently outperforms reactive decision-making driven by short-term headlines. Our weekly commentary is designed to inform, not alarm: we put market moves in their proper historical context so that clients can hold conviction in their financial plans through periods of uncertainty.

As an SEC-registered investment advisor headquartered in Austin, Texas, with offices across the Southwest and Southeast, Waterloo Capital serves high-net-worth individuals, families, and institutions. Our advisors use proprietary research like this weekly recap as one input among many — alongside in-depth portfolio reviews, tax planning, and estate strategy — to deliver comprehensive wealth management tailored to each client relationship. To learn more about how our investment philosophy and ongoing market research can serve your financial future, contact our team directly.

Investment Disclosure: The information contained in this article is provided for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal. Waterloo Capital, LP is an SEC-registered investment advisor. Registration does not imply a certain level of skill or training. Please consult with a qualified financial professional before making any investment decisions.

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This Week on Wall Street – Week of August 5th | Waterloo Capital