Economic Update 8-15-2022
- Economic data for the week included consumer price inflation coming in little changed on the headline side, while producer price inflation declined on a headline level. Consumer sentiment improved more than expected.
- Global equity markets rose sharply last week, as slowed inflation results led to positive sentiment. Bonds fared positively, with little change in rates, but tighter credit spreads. Commodities gained across the board, helped by a weaker dollar.
After a lackluster start to the week, U.S. stocks were up sharply on Wed. onward after the monthly CPI report showed a flattening in headline prices, and core CPI not getting significantly worse. The search by markets for an inflation peak translates directly to the path the Fed may take in upcoming meetings, such as whether the Sept. FOMC rate hike will be 0.75%, 0.50% (consensus base case), or 0.25%. From a technical standpoint, markets have upwardly retraced almost 50% of the early 2022 decline, which has generated more bullish sentiment. For the chartists out there, a key question has been whether an upward ‘breakout’ continues to take hold from this point. Every sector gained ground last week, led by energy, materials, and financials, all gaining over 5%. Defensive sectors consumer staples and health care lagged with gains under 2%. Real estate rose over 4% on the week as well.