At the doorstep to September - Market Outlook

All the action last week was leading up to the Jackson Hole Symposium on Friday, in which Federal Reserve Chair Powell gave his assessment of the state of the economy. It was widely expected that the outlook presented would be rather gloomy, but when it finally came the markets drew a sigh of relief – not only in the US but globally as well.

“Although inflation has moved down from its peak — a welcome development — it remains too high. We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective”, Powell said. But he also stated that the Central Bank would “proceed carefully”, regarding further rate hikes.

All in all, the comments managed to appease the markets for now. With August coming to an end, we can conclude that it has been a difficult month for the markets in general (with all major indices down by a couple of percentage points or more). And, as we head into September, it is worth keeping in mind that statistically it is the worst month of the calendar. So, the momentary market bounce that we are seeing could prove to be short-lived.

Scheduled for the week ahead are GDP numbers (US) on Wednesday, followed by the highly important PCE data on Thursday. The Core PCE Price Index is regarded the key measure of inflation for the Fed in deciding the trajectory of its monetary policy (i.e., rates). Lastly, on Friday, we’ll get NFP (on job creation), Average Hourly Earnings and PMI figures. These are all quite important as well and will set the tone for next month.

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