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Nvidia’s impressive report didn’t exactly light up the markets: for the week, the S&P 500 index posted a modest 0.58% gain, while the dollar index received a 0.82% boost.
This suggests that markets continue to see a bleak outlook for the sector and the economy. This is likely due to concerns about a possible economic slowdown and uncertainty about future rate hikes.
For example, even Fed members are still deciding what to do next. Although inflation has accelerated, some insist on continuing the battle, while others advocate a pause.
To be more precise, Susan Collins, president of the Boston FRB, stated that it is possible for the Fed to raise rates further, while Harker, president of the Philadelphia FRB, sees no need for it.
Jerome Powell’s speech in Jackson needed to provide more clarity, too. Once again, we heard that interest rates may or may not rise but that the intention is to keep them stable for an extended period (until mid-2024).
On the other hand, the regulator is facing a difficult situation:
The labor market remains overheated, with a surprising decline of 10,000 jobless claims, but more than 400 companies have filed for bankruptcy since the beginning of the year.
Cases are rising at the fastest pace since 2010 (excluding the pandemic) and double those of this time last year, and if the Fed raises rates again, the situation may worsen.
Thus, it is clear why Powell & Co prefers to wait for the data sooner and hope for the best before pushing the economy away from the brink of the abyss.
In Asia, the situation is different.
China’s economic growth has significantly slowed, and there is a possibility of a prolonged period of stagnation, similar to what Japan has experienced since the early 1990s.
Analysts attribute this slowdown to excessive debt and deteriorating relations with Western countries. Beijing also faces difficulties in expanding its infrastructure.
To support the markets and restore investor confidence, China took a step on August 28 by reducing the stamp duty on stock transactions by 50% for the first time since 2008.
Overall, it looks like September will be volatile for the markets and not necessarily in a positive sense, so keeping an eye on the stock screener is recommended.
