Weekly Market Update

Fed Debates Rate Cut Amid Mixed Economic Signals

September 17, 2024

The past week in financial markets has been dominated by speculation around the potential size of the Federal Reserve's expected interest rate cut at their September meeting. As of early this week, market pricing indicates around an 80% probability the Fed will opt for a larger 50 basis point cut rather than 25 basis points.

Arguments for a 50 basis point cut centre around the Fed funds rate currently being at a very restrictive 5-5.25% level, with the Fed now more concerned about labour market weakness than inflation. Several current and former Fed officials have suggested a strong case could be made to cut by 50 basis points and "rip the band-aid off", rather than gradually lowering rates. However, cautiousness and a desire to remain data-dependent may still lead the Fed to start with a smaller 25 basis point cut.

US economic data has been mixed, making the Fed's job even harder. The NY Empire State manufacturing index surged unexpectedly to an over 3-year high in September. However, retail sales and industrial production data this week will give a clearer readthrough. As economist Paul Krugman argues, the Fed risks staying "too long in the shower" - waiting for data while the economy potentially heads into recession.

In other central bank news, the ECB cut rates by 25 basis points as expected but opened the door to another cut as soon as October if data deteriorates further. High services inflation remains a concern. The Bank of Canada faces a key CPI release that could solidify whether their next hike is 25 or 50bps.

Chinese economic data over the weekend again underwhelmed, with credit growth, retail sales and industrial production all slowing. More forceful policy easing is expected in the months ahead, though potentially not until after the US election.

In markets, the US dollar continued its recent descent, falling against most major currencies. Treasury yields edged lower with the 10-year hovering near 3.6%. Equities were mixed, with tech and growth stocks doing relatively well overall even though Apple was on the back foot. Global smaller companies were the next best performing equity asset class, followed by emerging markets. Oil prices rose around 2% on supply disruptions. Gold hit another record high above $2,580/oz.

Overall, markets have been in a bit of a holding pattern as investors weigh global growth concerns, central bank policy shifts, China risks and the upcoming US election. The size and pace of Fed rate cuts is the dominant focus for now - but one which policymakers themselves appear genuinely uncertain about as they balance inflation and recession risks.

Markets Slammed By Hawkish Rhetoric Despite Pause From The Fed

August 2, 2024
Equity markets around the world fell more or less in unison last week by about 3-4%, before bouncing slightly on Friday. The UK was really the only market to buck the trend, as the Bank of England unexpectedly kept rates on hold after inflation fell by more than forecast.
Read More

Sticky Inflation Concerns Put Markets on the Back Foot

August 2, 2024
Last week markets were down again, reflecting the trends that took root in September - long-term yields pushing higher with markets on the back foot.
Read More

Riding the Market Rollercoaster

August 2, 2024
If we had written this commentary early in the week as intended, we would have said that markets were still on the back foot, as they were down another few percent. However, having got to the end of this week things have improved quite a bit and most markets are now actually up a few percent, with China leading the way.
Read More

Rising Rates Rattle Stocks as Geopolitical Risks Emerge

August 2, 2024
This week rates have headed resolutely upwards, and stocks have not liked it much with most markets heading steadily downwards throughout the week.
Read More

Stocks Stumble, Bonds Steady as Growth Fears Loom

August 2, 2024
Equity markets declined over the past week, with the S&P/ASX 300 down -3.3% and the MSCI World Ex Australia index falling 2.7% in local terms, but only -0.9% in Australian Dollar terms for the unhedged Australian investor. Most of the falls happened overnight as a higher-than-expected GDP number put upward pressure on short-term rates.
Read More

October's Financial Flux: A Precursor to Change in Investor Fortunes

August 2, 2024
During October, global markets experienced a downturn amidst inflation worries and the threat of rising interest rates, leading to a 2.7% fall in global equities and a 3.8% drop in Australian stocks, with tech sectors and major companies like Nvidia and Tesla taking notable hits. Despite the gloom, the materials sector saw gains, and gold shone brightly as a safe haven, appreciating by 7.3%.
Read More

US momentarily dips into official bear market territory

August 2, 2024
The seventh negative week in a row for the US sent it briefly into official bear market territory before it recovered slightly late on Friday. The world’s largest stocks (Apple, Microsoft Amazon and Google) are all down 25%.
Read More

What is a fair way to compare funds?

August 2, 2024
How Can We Do Apple With Apples Comparisons For Industry Funds With Different Asset Allocations And Levels Of Illiquid Investment?
Read More

Finding value and maintaining confidence in a FOMO world

August 2, 2024
Join host Toby Potter of IMAP with Nick Kirrage of Schroders and Jonathan Ramsay of InvestSense as they discuss value as a style, and as a driver of conviction when investing.
Read More

Inflation in 2022 - Beware of cross currents in 2022

August 2, 2024
With inflation appearing to be on the way up again, what are some of the possible scenario’s for 2022? Where does inflation go from the zero bound we’ve reached?
Read More

What happened in markets in 2021, and why?

August 2, 2024
Join InvestSense Director, Jonathon Ramsey to reflect on the price action seen in markets in 2021 and what this might mean for 2022.
Read More

We've got a bad case of FOMO, but it's not what you think

August 2, 2024
With valuation still being the lightening rod for when markets react to external forces, the most expensive things tend to move the most. What does this mean for global asset allocators, and what is InvestSense’s position?
Read More

Markets slid again last week, with a concentrated sell off in US tech

August 2, 2024
Markets slid again last week but the selling was concentrated in US tech, most of which is down 10% or so this year. Much of last week’s selling occurred in the last 2 sessions of the week.
Read More

Recession fears build, yet equity markets end the week higher

August 2, 2024
Fears of a US recession later this year gathered pace last week and the US equity market jumped by almost 7% and the Nasdaq was up some 9%.
Read More

Inflation - Flash Update

August 2, 2024
In light of the recent inflation data coming out of the US, we dive in to why the market is so upset about a 0.1% increase in prices, and what this means from an Australian investor's perspective.
Read More

Interest rate sensitivity persists into the new year

August 2, 2024
During the last few weeks, the prospect of rising interest rate expectations continued to grip markets, as the soft landing/rapid disinflation thesis was tested.
Read More

Strong start to the year continues despite recession concerns

August 2, 2024
As the world’s elite gathered in a snowless Davos, markets focused on much more immediate concerns, starting with the continuing wave of layoffs in corporate America. Amazon, Microsoft, Alphabet (Google’s parent company), Salesforce and Goldman Sachs, among others, took turns to announce staff cuts. It would appear boardrooms and CEOs are lending some credence to the possibility of a recession in 2023.
Read More

Equities turbulent but resilient as interest rates rise

August 2, 2024
Last week the S&P 500 traded in a 3% range, having done a 2% round trip on Thursday, followed by a 3% fall on Friday after the inflation data release and then another almost 2% round trip yesterday. Emerging markets were the worst performing, down 4% for the week. Taking a step back though, most equity markets haven’t given back that much of their gains from January, while Europe and the Nasdaq remain up 10% for the year.
Read More

Helping your clients assess the climate impact of their Portfolio

August 2, 2024
Nathan Fradley explains how the ethosesg technology can help you assess and design an ethical portfolio that aligns to an investor’s personal values.
Read More

Carbon credits and investing – is it the outcome we expect?

August 2, 2024
ETFs that invest in carbon credits are now available. Why should we assume that their price will go up over time? And does buying a carbon credit ETF actually contribute positively to emissions reduction? Will it actually generate the outcome investors are expecting? This article explores the issues around investing in carbon credits.
Read More

Better World makes a difference with investment in renewables

August 2, 2024
There are many direct assets and funds that contribute positively to climate action within the InvestSense Better World Portfolios. Meridian Energy is one of the stand-out direct assets in the portfolio with a climate energy focus.
Read More

Bad news equals good news

August 2, 2024
In recent years professional investors have got increasingly used to the fact that good news is bad news for markets because higher interest rates are likely to be necessary, and of course vice-versa. However, last week the effect was stronger than ever and stocks rallied mid-week amidst reports of widespread lay-offs and expectations of a weak US jobs report.
Read More

‘Buy the dip’ opportunism start surfacing

August 2, 2024
The US market finally market caught a bid last week. Early in the week the market was down few percent after an earnings miss by ad dependent social media platform Snap (of Snapchat fame) combined with weak guidance raised more doubts about the economy and economic resilience of tech companies.
Read More

US momentarily dips into official bear market territory

August 2, 2024
The seventh negative week in a row for the US sent it briefly into official bear market territory before it recovered slightly late on Friday. The world’s largest stocks (Apple, Microsoft Amazon and Google) are all down 25%.
Read More

How Mark Lewin saved 13 hours a week with Managed Accounts

August 2, 2024
Mark Lewin was a financial planner, but is now the Director of Back Office Heros. In his planning business he gained significant efficiencies by recommending and implementing managed accounts for his clients. He tells us how...
Read More
Icon of a letter

InvestSense insights, delivered straight to your inbox.

Icon of a letter

Get the latest industry news

Icon of a letter

Get the latest industry news

Icon of a letter

Get the latest industry news