Equity markets across the globe continued lower last week as both macro headlines weighed on investor sentiment and the seasonally-weak summer trend seemed to play a role. The S&P 500 fell below its 50-day moving average as fund flows showed a move away from equities. Treasury yields spiked mid-week as strong economic data supported the higher-for-longer messaging from the Federal Reserve (Fed), and the July Federal Open Market Committee meeting notes highlighted the resilience of the economy but also the uncertainty of the impact from policy tightening.
Both developed and emerging markets are grappling with macro headwinds and their relative price trends remain weak. China’s economic sluggishness has been in focus as it struggles to recover post-COVID and was made worse last week with the Evergrande bankruptcy filing – shining a spotlight back on to the country’s well-documented real estate troubles. In Europe, energy and agricultural prices are surging while the major manufacturing surveys continue to contract.
Despite U.S. equity markets’ recent bout of negative performance, corporate earnings have surprised to the upside with 79% of the reports so far beating expectations, according to FactSet. The U.S. economy still appears to be in better shape relative to most of the globe; however, Fed Chair Powell’s remarks at Jackson Hole this week should provide more clarity on his view of the U.S. economy.
A look back
- Global equity markets fell for the third consecutive week with U.S., international developed, and emerging markets down by more than -2% last week.
- Yields were mixed last week, yet still at elevated levels, with some steepening between the 2-/10-year U.S. Treasury curve.
- U.S. 30-year fixed rate mortgage rates rose to their highest level in over 20 years last week as new home buyers now face rates exceeding 7%.
A look ahead
- Several notable companies will report this week, including NVIDIA, which energized markets in the first quarter with a robust outlook for artificial intelligence spending.
- On Friday, Fed Chair Powell will present his economic outlook at the Jackson Hole Economic Symposium.
- Economic releases: Existing & New Home Sales, S&P Global U.S. Manufacturing & Services, Durable Goods Orders, U. of Michigan Sentiment.
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