Please see below the Daily Investment Bulletin from Brooks Macdonald, which was received early this morning (30/08/2024):
What has happened
Today marks the end of a remarkable month in markets – a cursory glance at current headline equity indices belies the hiatus that hit investors at the start of the month. Indeed, even despite the latest volatility in US megacap technology company Nvidia’s share price with its results earlier this week, markets have continued to recover their poise. As a case in point, the equal-weighted version of the US S&P500 equity index yesterday notched up a fresh record high. It was also a decent day in Europe yesterday with the pan-European STOXX600 equity index closing just a hair’s breadth beneath its all-time high that it hit back in May.
US GDP data pushes back on recession fears
Buoying the market’s positivity in the past 24 hours has been a better-than-expected US Gross Domestic Product (GDP) release (in real terms, adjusting for inflation), pushing back further on recession fears that worried markets in particular just a few weeks ago. The second estimate of US Q2 GDP was published yesterday, and it was even more positive than the first estimate that was released late last month. The latest US GDP print for Q2 was revised up to a quarter-on-quarter annualised growth rate of +3.0% and coming above the preliminary first reading for Q2 of +2.8%. Cutting the data another way, the Q2 year-on-year print now stands at +3.1%. All in all, these numbers really do not support a near-term US recession outlook, especially when you consider that the US Federal Reserve’s so-called ‘longer-run’ GDP assumption for US annual GDP growth is at +1.8%.
More data to end the month
Later today we get the latest US Personal Consumption Expenditures (PCE) monthly inflation reading for July. This data matters, but arguably especially so at the moment, given the US Federal Reserve (Fed) is at a pivotal inflexion point for its interest rate policy, with markets expecting the Fed to cut rates next month. As a reminder, the PCE inflation data is the measure that the Fed officially targets, so this will help inform the Fed as they look to shape their next policy choices.
What does Brooks Macdonald think
Anyone hoping for a meaningful thawing in the frosty relationship between China and the US could be in for a long wait. This past week has seen US national security adviser Jake Sullivan hold three days of talks in China, including a meeting with China’s president Xi Jinping. Of particular note, in his meeting with China’s Foreign Minister Wang Yi, Sullivan said the US would “continue to take necessary actions to prevent advanced US technologies from being used to undermine our national security”.
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Carl Mitchell – DipPFS
Independent Financial Adviser
30/08/2024