A fallen leaf is a summers wave goodbye
The S&P 500 finished the month with a modest gain despite the volatility at the start of the month, the yen carry trade is long forgotten. For a change, the recovery has not been led by the technology sector, as there has been a broadening in the breadth of sector performances. Indeed, the “magnificent 7” index is down on the month. The Russell 2000 index outperformed its big brother in August, driven by the ever-increasing expectation as the month went on that the Fed is going to cut interest rates this month. The following question will then be by how much before the year ends. Falling interest rates should be good for stock prices, but that is not always the case initially, at least as it is often in reaction to an economy in recession. Stock markets remain optimistic about the soft landing scenario; bond markets are a little more sceptical.
This past week, the Goldilocks soft landing playbook further buoyed the US market. Estimates for 2nd quarter GDP were revised higher, and on Friday, growth in the Personal Consumption index in July came in at 2.5%. This was slightly below the economists estimates of 2.6%, and the same as the previous months, although it does remain above the Feds 2% target. Bond investors have likewise had a decent month; yields on the 2-year US treasury started the month at 4.4%, finishing the month below 4%. The US dollar had a modest recovery towards the end of August, but the ever-increasing expectation of a cut in interest rates saw the dollar fall over the month. Oil prices did jump higher at one point in the month as geopolitical tensions rose but drifted back as the month wore on, as the fundamentals of oversupply and a lack of demand hit prices. The FTSE 100 made modest gains on the month.
Looking to the week ahead, the US is shut today for a Labour Day holiday. However, there is always something for markets to focus on as the week wears on. As is the case at the start of every month, we get the monthly Purchasing Manager Surveys results. Earlier this morning, China’s Caixin General Manufacturing index was slightly ahead of expectations and back above the 50 mark, if only just. We will get further evidence of the health of the US labour market this week; on Wednesday, The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey. Economists forecast 8.1 million job openings on the last business day of July, about 100,000 fewer than in June. Then, on Thursday, ADP releases its National Employment report for August. The consensus call is for an increase of 140,000 in private-sector employment, following a 122,000 gain in July. Aside from the PMIs, little is coming from the UK this week on the economic data front.
Does anyone actually know anyone who ended up with Oasis tickets? Do they actually even exist?