The InvestSense Podcast

Markets faced a week of contrasts as weakening U.S. employment data reinforced expectations for Federal Reserve rate cuts, while the Australian economy continued to demonstrate surprising resilience. Meanwhile the UK, Japanese and French fiscal and political situations were dominating the headlines for all the wrong reasons. If these were canaries in the coal mine in full voice markets weren’t listening as most overseas markets were up while the local market (mostly banks) went the other way. It is fair to say though that the economic data in all economies is pretty noisy at the moment, to say the least.  

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Global markets experienced a week of heightened volatility and diverging performances as political uncertainties overshadowed economic data, with gold reaching new highs while equity markets showed mixed results across regions.

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Global markets experienced heightened volatility in the fourth week of August as technology stocks faced renewed scrutiny over artificial intelligence valuations, central banks charted divergent paths, and political drama tested Federal Reserve independence.

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Global equities rallied last week, with the MSCI All Country World Equity index hitting an all-time high above 954. The VIX volatility index fell to its lowest level since December, signaling strong confidence despite ongoing uncertainties.This broad-based rally extended beyond the U.S. to European and Australian markets.

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Markets were fairly quiet during the last week before rising strongly in the last few days after a fairly ambiguous US CPI print. Many observers have been puzzled by the market's sanguine reaction to the core measure which was only slightly above expectations but did  show a concerning uptick in goods inflation likely due to tariffs. Japan's market surged disproportionately, suggesting the influence of liquidity flows, while in the U.S., mega cap tech names have reported strong earnings amid AI investments, although there are also  signs of deceleration in the broader economy. Substantial capital inflows as people and companies front ended likely tariffs appear to the smoking gun while fiscal stimulus has also been helpful in supporting asset prices. However, as we discuss in this week’s What We Are Working on Video with Andrew Hunt, questions remain about the sustainability of these factors, leaving markets delicately balanced between inflationary and deflationary outcomes, with liquidity acting as a powerful but fickle determinant.

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This episode covers a week where strong Big Tech earnings collided with macroeconomic headwinds. Amazon, Apple, Meta, and Microsoft all beat expectations, yet markets slipped as investors weighed lofty valuations, a sharp slowdown in U.S. job growth, and renewed trade tensions from fresh U.S. tariffs on 68 countries and the EU.

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Last week trade developments dominated sentiment but underlying economic trends remain sluggish. Central banks are in wait-and-see mode amid mixed data. 

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Last week saw U.S. equities push to new highs with the S&P 500 breaking through the 6,300 mark, even as tariff concerns loomed large with the August 1st deadline approaching. There is a bit of a continuing disconnect between equity optimism and underlying economic anxieties, with the dollar strengthening for most of the week before pulling back.

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Markets remained broadly stable despite the announcement of new U.S. tariffs on copper, pharmaceuticals, and Brazilian imports. We look at the impact of a stronger-than-expected U.S. CPI print on bond yields and shifting expectations for interest rate policy.

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Markets ended the week flat but not without turbulence, as surprise tariffs and central bank uncertainty unsettled investors. 

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