Market Pulse

Market Pulse

August 29, 2022

Market views heading into the week highlight what we're watching and important news ahead.

In focus

Last week policy experts, academics, and economists converged upon the Jackson Hole Economic Policy Symposium for three days of discussion about the state of the economy and potential policy options. The event concluded with a historically short and direct speech from Federal Reserve (Fed) Chair Jerome Powell, who unambiguously stated that the Fed would stay the course with its hawkish stance. He reiterated the importance of price stability to a flourishing economy and explained that the path to re-establishing stability will cause some pain to both households and businesses.

Fed Chair Powell’s speech sent U.S. equities markedly lower, closing out the worst week for the S&P 500 in over two months. The sudden drop lends support to one common narrative that a key factor behind the recent rally was based on the expectations for a dovish pivot by the Fed, which clearly did not occur on Friday.

Global markets had other news to digest as Russia’s invasion of Ukraine surpassed its six-month mark. Energy prices in Europe have continued upward since the invasion began on February 24th, last week causing the United Kingdom’s Office of Gas and Electricity to increase the household price cap by 80%. The move highlights cost of living challenges effecting households globally.

Markets will likely stay choppy as the global and domestic environments remain challenging due to elevated geopolitical risks and synchronized tightening of monetary policy. All eyes will now turn later this week to Friday’s employment report considering the blockbuster job gains seen last month and in light of Fed Chair Powell’s speech.

A look back

  • After a mixed week, global stocks ended down, led by U.S. equities which declined by 4.0%. International developed markets were down 1.9%, while emerging markets remained positive at +0.5%.
  • The 2-year U.S. Treasury yield increased 0.16% while the 10-year moved higher by only 0.06%, further inverting the 2/10-year U.S. Treasury yield curve.
  • In line with the previously reported July existing home sales and housing starts, fresh data for both new and pending home sales provided further evidence of a slowdown in the U.S. housing market.

A look ahead

  • Nord Stream 1 pipeline, which transports Russian gas into Europe, will be closed this week for three days of maintenance, raising concerns of further supply issues which could push prices higher.
  • Investors will be looking ahead to Friday’s release of both Nonfarm Payrolls and the Unemployment Rate to see how the jobs market held up in August.
  • Economic releases: Dallas Fed Manufacturing, Consumer Confidence, Initial Claims, ISM & Markit Manufacturing & Services, Durable Goods Orders, Nonfarm Payrolls, and the Unemployment Rate.

 

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