The InvestSense Podcast

In this week’s market sense check we cover what’s affecting the market in short-term, the mid-term and what may unravel in the long term.

Topics Covered:

• Fed Rate cut speculation heats up
• Market signals in response 
• The resilience of small companies 

Get access to the charts: www.investsense.com.au/industry-articles/fed-debates-rate-cut-amid-mixed-economic-signals 


Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

In this week’s market sense check we cover what’s affecting the market in short-term, the mid-term and what may unravel in the long term.

Topics Covered:

• An overview of market performance in August
• Nasdaq’s sharp drop and tech sector concerns
• Weak U.S. job growth and its market implications
• Active manager underperformance and key factors driving it
• Long-term economic and market themes to watch for the next decade

Get access to the charts: www.investsense.com.au/industry-articles/cooling-job-growth-falling-yields-and-market-volatility  


Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

This past week saw a mix of economic data and corporate earnings that drove market sentiment.

In brief:

Mixed Results from Australia's August Earnings Season: While the banking sector showed strong performance despite some scepticism about valuations, mining and energy companies faced significant challenges. Meanwhile, consumer spending remained robust in some areas, but there were signs of caution in the services sector, highlighting the uneven economic landscape.

Nvidia's Earnings Disappoint Despite Strong Results: Nvidia's earnings report, one of the most anticipated this season, exceeded expectations by doubling sales and earnings from a year ago. However, the stock still saw a sell-off, reflecting investor concerns about the sustainability of AI infrastructure spending. 

Global Economic Signals and the Upcoming August Jobs Report: With signs of both resilience and slowdown in global markets, all eyes are on this Friday's August jobs report. It could be pivotal in determining the Federal Reserve's policy direction and the market's trajectory for the rest of the year. Investors are hoping for a "Goldilocks" reading that indicates a gradual labour market slowdown without signalling an imminent downturn.

Get access to the charts: www.investsense.com.au/industry-articles/august-reporting-season-the-misses-and-beats  


Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

Financial Markets Grapple with Implications of Fed's Shift in SignalsLast week saw financial markets grapple with the implications of Fed Chair Jerome Powell's speech at the Jackson Hole symposium. In brief:
 
Federal Reserve Signals Rate Cuts: Fed Chair Jerome Powell stated "the time has come for policy to adjust," indicating the Fed is prepared to begin cutting interest rates. This dovish shift sparked a rally in equities and a decline in bond yields on Friday.

Mixed Economic Data: U.S. durable goods orders rebounded strongly in July, up 9.9% month-on-month, but this was largely due to volatile aircraft orders. Core capital goods shipments, a key indicator of business investment, fell 0.4%, suggesting potential weakness in Q3 GDP.

Global Growth Concerns: The German Ifo business climate index fell to 86.6 in August, with the current conditions reading at its weakest level since August 2020, highlighting ongoing concerns about European economic growth.

Get access to the chart: www.investsense.com.au/industry-articles/financial-markets-grapple-with-implications-of-feds-shift-in-signals 


Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

In brief: 

Strong Global Equity Performance: Global equity markets posted their best performance in nine months, driven by hopes of rate cuts from the Federal Reserve and encouraging economic reports such as lower-than-expected inflation and strong retail sales.


Fed Rate Cut Expectations: Recent economic data has caused investors to reconsider the likelihood of a 50bps cut at the Fed's next meeting in September. While a 25bps reduction remains highly likely, the probability of a larger cut has decreased from 50% to approximately 25% over the past week.


Australian Corporate Earnings Overview: The Australian reporting season has provided mixed insights into the economic landscape, with a balanced number of companies exceeding, meeting, or falling short of modest expectations. Notably, AMP and Telstra Group exceeded expectations while Suncorp Group fell short, highlighting ongoing challenges within its operations.

Get access to the chart: www.investsense.com.au/industry-articles/equity-markets-rally-on-rate-cut-hopes-and-positive-economic-data  

Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

The past week in markets was significantly calmer, with the S&P 500 reporting a 10.8% year-over-year earnings growth—its highest since Q4 2021—the focus now shifts to the Australian reporting season.


In brief: 
US Earnings Performance: The S&P 500's year-over-year earnings growth was driven by strong results in the Utilities and Information Technology sectors, highlighting corporate strength despite high interest rates and political challenges.
 
Inflation Trends and Federal Reserve Actions: Recent US Producer Price Index (PPI) data came in below expectations, strengthening the case for the Federal Reserve to consider rate cuts as early as September. This anticipation builds as markets await the upcoming US Consumer Price Index (CPI) release, which will play a critical role in shaping the Fed's rate path in the face of fluctuating economic signals.

Australian Market Outlook: The onset of Australia's earnings season reveals a modest decline in profits among the top 200 listed companies, with an expected drop of 2-3% for the 2023-24 financial year. This downturn marks the end of unusually high profits seen during the pandemic. Current economic pressures are particularly evident in retail, with companies like JB Hi-Fi and Myer revealing the impacts of constrained consumer spending.

Get access to the chart: www.investsense.com.au/industry-articles/us-market-settle-as-australian-reporting-takes-centre-stage 

Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

Several unexpected events during the first week of August led to big moves in the markets


In brief:

• Surprise Interest Rate Rise: The Bank of Japan started raising rates in an unexpected move after keeping them very low for a long time
• Weak Jobs Report: An unexpected US jobs report on Friday triggered the ‘Sahm Rule’ rule, seen as an indicator of potential recession when the unemployment rate rises >0.5% in a 3-month period
• Equity markets reacted negatively: On Monday, markets plunged, especially in Japan which at one point was down 20% in local currency terms, in what appeared to be an unwind of the yen carry trade.

Find out what happened, why and what it means now. 

Get access to the chart: www.investsense.com.au/industry-articles/market-turbulence-following-weak-u-s-jobs-report-and-surprise-rate-hikes-in-japan 

Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

Last week saw markets treading cautiously as investors digested a flurry of earnings reports and economic data. 

In Brief:


Shift in Market Dynamics: The Russell 2000 index of small-cap stocks rose nearly 3% last week, outperforming major indexes like the Nasdaq and S&P 500, which struggled to stay positive. This performance continues to fuel discussions about a potential rotation from mega-cap tech stocks to smaller companies.


Tech Sector Volatility: Despite strong earnings from tech giants Alphabet and Tesla, their forward guidance raised investor concerns. Notably, Tesla's shares fell by 12% following news of a delayed robo-taxi rollout, contributing to a broader tech sell-off.


Contrasting Global Economies: The US economy showed strong growth, expanding by 2.8% in Q2, which surpassed expectations and eased some recession concerns. In contrast, Europe displayed weaker economic signs, particularly in Germany where both manufacturing and services are contracting. The Bank of Canada cut rates as expected and speculation is mounting that the Fed may follow suit in September. 


Read the summ: www.investsense.com.au/industry-articles/a-week-of-mixed-market-movements-small-caps-rise-as-tech-wavers 


Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

This past week has shown broad declines across major asset classes, challenging the optimism around peaking inflation and potential central bank easing. 

In brief:


U.S. Economic Indicators: The S&P 500 and Nasdaq hit record highs due to cooling inflation expectations and possible Federal Reserve rate cuts. However, following news that the Biden administration is considering tighter restrictions on semiconductor exports to China, the Nasdaq faced a sharp decline, dropping 3.7%. 

Global Market trends: Despite easing inflation, economic data suggests a slowing global economy. Major stock indices around the world experienced notable declines; Japan's Nikkei 225 slumped by 2.71%, while European stocks, including the Euro Stoxx 50, German DAX, and French CAC 40, dropped by 0.7% to 1.1%. Emerging market stocks were flat.

Australian Market Trends Downward: The S&P/ASX 300 ended the week down by 1.40%. Energy stocks took the hardest hit, dropping by 6.45%. The S&P/ASX Small Ordinaries, representing smaller cap stocks, fell by 2.71%.


Read the article: www.investsense.com.au/industry-articles/a-week-of-contrasts-in-global-markets-from-record-highs-to-renewed-growth-concerns 


Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights

In brief: 


Falling US Inflation Sparks Hope: Last week's US CPI report revealed a quicker than expected drop in inflation, raising hopes for potential early Federal Reserve rate cuts, leading to a significant drop in US bond yields.

Global Political Developments Impact Markets: In France, Marine Le Pen's party did not secure a majority, easing concerns about a radical shift in politics, while the UK's better than expected GDP growth in May provided a slight economic uplift amidst ongoing fiscal policy discussions.


Anticipation of Global Rate Cuts: With the US possibly heading for rate cuts following encouraging inflation data, other global central banks, including the Bank of Canada and the Reserve Bank of New Zealand, signalled possible easing.


Read the update:https://www.investsense.com.au/industry-articles/us-inflation-decline-triggers-market-shift 

Join the InvestSense Community to receive weekly insights from our investment team: https://www.investsense.com.au/investsense-insights