2023-09-04 11:50:05
After the Jackson Hole symposium, equity markets were able to move forward once more. The Fed and the ECB maintained their message of caution on the evolution of inflation. However, future rate hikes, if they occur, will depend on economic statistics. However, during the week, the latter were rather below expectations on two important parts of the economy: employment and consumers in the United States. The number of available positions (JOLTS Job Openings) fell from 9.17 million in June to 8.83 million in July, accentuating the movement in place since the start of the year. The quit rate has also dropped, showing that employees are less confident regarding their ability to find a new job. On the consumer side, confidence measured by the Conference Board fell more than expected in August.
These indicators, at this stage, rather show a normalization by remaining at fairly high levels. Thus, US household spending increased in July by 0.6% compared to the previous month. The final US GDP figure for the second quarter was revised downwards with an annualized growth of 2.1% and a price increase less strong than expected. Finally, the PCE inflation indicators in the United States came out in line with expectations and stabilized: +0.2% monthly growth for the “core” part and +4.2% in annual variation.
In the euro zone, despite different situations depending on the country, the aggregate data show stable global inflation at +5.3% with a return of the rise in oil prices. Core inflation figures (excluding food and energy) are rather reassuring: down over one year from +5.5% to +5.3%. Added to this, the minutes of the ECB and the last speech of Mrs. Schnabel, member of the ECB, pointed out the risks on the economic growth of the euro zone.
Thus, rates eased on both sides of the Atlantic, with economic statistics reinforcing the idea that the rate hike cycle is soon coming to an end. This supported the rebound in equities during the week, which also benefited from the evolution of the Chinese situation. Indeed, the Chinese government and central bank have intervened several times, in particular by lowering rates, to limit the economic slowdown, support the markets but also their currency.
In this context, we had increased our equity exposure in the fall of the markets and are maintaining these short-term positions. In the medium term, however, we have a more cautious view given the restrictive positioning of monetary policies, which should be maintained and thus reinforce the economic slowdown that is taking place. On rates, we are positive on duration, which will be a protective asset in this phase of economic uncertainty.
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