Fed more confident, so are markets
Federal Reserve Chair Jerome Powell spoke at the Economic Club of Washington, D.C. this week sounding more confident about the return of inflation.
- Inflation prints of the last months add somewhat confidence that inflation will return to Fed’s target
- Labor-market conditions are recently cooling and currently show a better balance
- Meeting to meeting approach was maintained
Markets now fully price in a first rate cut in September, US Treasury 2 year yield trades at 4.40%, returning from levels in the 5% area touched two months ago.
The Trump trade resumes
After the events occurred during the weekend, election pools in the US showed a further increase of Donald Trump’s lead over Joe Biden.
Markets reacted consistently, reviving the so-called Trump trade:
- Financials were strong in the light of hopes for more deregulation
- The energy sector appeared solid considering the Republicans’ historical support
- Globally, equities potentially exposed to new import tariffs were underperforming
- Countries like China and Mexico suffered in relative terms
China again subdued
The latest GDP data released this week, regarding the second quarter of the year came in below expectations, confirming a picture of an economy in search of new stimulus.
- Q2 GDP grew at the slowest pace in the last year (4.7% YoY), well below the expected +5.1% • Retails sales came in at +2.0% YoY in June, which was the worst published figure in over a year and a half (expectations were at +3.4%)
- Home prices in June declined by -0.67%
Investors eyes are now on the Third Plenum, the conclave that happens every five years, and in the past was used to announce major strategical changes.
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