Market Update: August 29, 2023

Economic data for the week included a decline in durable goods orders, while housing data was mixed, with a drop in existing home sales offset by a rise in new home sales.

Equities rose globally as economic growth continued to stay non-negative, along with hopes for an eventual peak in interest rates. Bonds fared positively in the U.S. as yields fell back from prior-week highs. Commodities gained due to specific supply/demand dynamics and continued waning recession fears.

U.S. stocks gained on the week, with mixed economic results and subtle positives, such as UPS workers approving a new 5-year labor deal, although autoworkers have yet to do the same. Positive market response to Fed Chair Powell’s non-controversial opening comments to the Fed’s Jackson Hole conference also helped sentiment. For now, the financial market response seems to continue to be all about yields. By sector, technology led the way, up over 2% (helped by NVIDIA’s results), followed by gains in consumer discretionary and communications; laggards included energy and consumer staples. Real estate also gained three-quarters of a percent for the week.

Foreign stocks were mixed, with gains in Japan, moderate expansion in Europe, and flattish U.K. returns. Emerging markets outperformed developed, due to areas outside of China, such as Brazil, Turkey, South Africa, and Korea. Interestingly, on the negative side, services PMI’s have been softening in Europe, turning contractionary (below 50) by some measures. This is one of the two possible outcomes that could turn positive global economic growth more recessionary—services joining manufacturing in contractionary territory (the other scenario was manufacturing deteriorating even further, pulling down total activity to the recessionary point). Of course, the ‘soft landing’ thesis is based on either manufacturing bottoming and even turning around sooner than later, or, as has been the case throughout 2023, robust services expansion remaining strong enough to keep the global economy plugging along without a hiccup.

Bonds were mixed as yields were mixed across the yield curve—rising on the short end and falling on the long end. Bullish equity sentiment also helped push corporates higher, in both investment-grade and high yield, as well as bank loans. Developed market foreign bonds fell along with a stronger dollar, while emerging market bonds rallied with sentiment toward risk-taking.

Commodities gained across the board to varying degrees last week, despite a stronger dollar, with industrial metals and precious metals outperforming energy and agriculture. Crude oil declined a slight -1% last week to $80/barrel, as did natural gas prices, with lower inventories offset by a labor deal positively affecting Australian exports.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.