On the heels of last week’s dip, stocks around the globe rebounded in early trading this week. Very little has changed, making it tough to pinpoint the reason for this week’s swift rally. The surging Delta variant, turmoil in Afghanistan, and ongoing government crackdowns in China continue to loom. Despite these challenges, we saw a definite “risk-on” sentiment this week as small-cap stocks rallied nearly 3% and emerging markets tacked on more than 4%. According to Bloomberg, it has been nearly 200 days since we’ve had a correction of 5% or more in the U.S. In bonds, interest rates crept higher ahead of the Jackson Hole symposium where central bankers will meet virtually for the annual gathering traditionally held in Jackson Hole, Wyoming.
On Friday morning, we get a speech by Fed Chair Jerome Powell. Powell is expected to discuss how long higher inflation is expected to last, and the Feds course of action for addressing higher-than-target inflation. The Eurodollar futures market, which tracks short-term U.S. interest rate expectations, is currently pricing in rate-hike during the second half of 2022. On the economic front, durable goods orders decreased by -0.1% in July, slightly better than expectations for a -0.3% decline. In the coming days, investors will be keying in on the revised Q2 GDP report due Thursday as well as the core personal consumption expenditures (CPE) price index slated for Friday. The core PCE price index, which excludes the more volatile food and energy categories, is closely watched by the Federal Reserve as it conducts monetary policy and monitors inflation. Next Friday, investors will be watching the jobs report for a pulse on the labor market. Employment numbers are likely to jump in the coming months as unemployment benefits are set to revert to their pre-pandemic norm on Sept. 4th in many states. According to the most recent report from the Bureau of Labor Statistics, the number of job openings reached an all-time high of 10.1 million in June, despite more than 6.7 million new hires in that same month.
Source: GSAM, CNBC, Factor Investor
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