Despite market turmoil data points to slow global growth
Macroeconomic news took a back seat to markets last week. The sell-off in China continued and the crisis in investor confidence, amidst the summer vacation season, led to a global retrenchment, with most global equity markets losing ground last week.
The market moves seem to reflect a downgrade by investors of their global growth expectations. Investors appeared to seek safety in classic market safe havens, such as U.S., German, and Japanese government bonds, as well as these currencies and gold. Evidence of an improving U.S. housing market and improving activity in Europe were shrugged off. Market fears seemed to take root in softer purchasing manager flash data in the United States and China, as well as weaker U.S. inflation. In our view, the data is pointing to slow global growth rather than a potential recession.
There is little key economic data to alter market sentiment. The next major U.S. economic release is likely the September 4 employment report. In the meantime, market signals will likely be driven by sentiment and central bank activity. Authorities in China appear likely to take additional steps to support their economy and markets in the face of their declining domestic stock market and slowing economic growth.
For more information, please go to: https://reserve.usbank.com/insights/market-economic-update.
Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.
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