Market Pulse

This weekly publication provides a brief note on market views heading into the week, highlights what we're watching, and important news ahead.

Jeff Terrell, CFA

Senior Investment Strategy Analyst

Truist Advisory Services, Inc.

Chip Hughey, CFA

Managing Director, Fixed Income

Truist Advisory Services, Inc.

Dylan Kase, CFA

Investment Strategy Analyst

Truist Advisory Services, Inc.

In focus

Global markets have come under pressure and U.S. markets are set to open sharply lower due to a debt crisis at China Evergrande Group, a property developer in China. While this is likely to result in sloppiness in markets, it is unlikely to plunge the Chinese economy into recession or develop into a broader contagion event. That said, the real estate sector has been part of the broader crackdown on private companies by the Chinese government, and is a key reason we remain underweight international markets.

As the carousel of concerns continues to turn, one of the concerns that will be in focus this week is the Federal Reserve’s (Fed) tapering debate as the interest rate-setting FOMC meets on Tuesday and Wednesday. This will be followed by a press conference by Fed Chair Powell. Market participants will be looking for any change in tune regarding the timeline for the start of tapering in the wake of some mixed economic data, which showed inflation cooling slightly, retail sales rising unexpectedly, weekly jobless claims coming in a little higher than expected, and University of Michigan Sentiment remaining weak and below consensus forecasts.

Additionally, our macro team recently pushed off a quarter point of expected economic growth from 2021 to 2022. We now expect roughly 6.2% economic growth for this year and a healthy 4.5% clip next year. However, we don’t expect this to derail the Fed’s taper plans. While it is our view that the Fed won’t be specific about taper this week, most voting members on the FOMC have stated that they expect it to start this year.

A look back

  • Global markets edged lower for a second week, driven by declines in U.S., international developed, and emerging market stocks. The S&P 500 saw its first back-to-back weekly decline since May.
  • Shares in emerging markets came under pressure due to a debt crisis at China Evergrande Group, where government authorities told banks that they won’t receive an interest payment on loans due Monday.
  • The government in Macau announced a 45-day review of the casino industry, sparking a steep selloff in casino stocks.

A look ahead

  • The interest rate-setting Federal Open Market Committee (FOMC) will meet on Tuesday and Wednesday, followed by a press conference by Fed Chair Jerome Powell. Investors will be dialed in for any change in tune regarding tapering after the recent spate of economic data.
  • On Friday, Fed Chair Powell will give a speech on the economic recovery from the pandemic.
  • Economic releases: Building Permits, Housing Starts, New & Existing Home Sales, FOMC rate decision, and Markit Manufacturing & Services.

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