Please see below the weekly market commentary from Brooks Macdonald – received 24/08/2020.
Weekly Market Commentary | Fed policy review findings to be revealed this week amidst rising Coronavirus cases in Europe
24 August 2020
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By Edward Park
- European COVID-19 cases continue to rise, raising the risk of further reintroductions of restrictions
- The Jackson Hole economic symposium takes place this week with Jerome Powell expected to discuss the Federal Reserve (Fed) policy review
- The Republican National Convention contains a keynote from Donald Trump on Thursday – investors will be looking for any China hawkishness as the November election approaches
European COVID-19 cases continue to rise, raising the risk of further reintroductions of restrictions
The second wave of COVID-19 in Europe continued to gain pace over the weekend with France, Italy and Spain all seeing an increase in new cases. Investors will be watching to see if this is the prelude to a reintroduction of restrictions or any localised lockdowns. This uncertainty appears to largely be in the price however, with European equities and US futures starting the week strongly.
The Jackson Hole economic symposium takes place this week with Jerome Powell expected to discuss the Federal Reserve (Fed) policy review
The main event this week is likely to be the Jackson Hole economic symposium on Thursday and Friday. The keynote speech will be from Fed Chair Jerome Powell and he is expected to unveil the key findings and next steps from the Fed policy review. The full results are likely to be delayed until the Federal Reserve’s September meeting, but the key messages will be important to the future path of interest rate and inflation expectations. The review considers, amongst other items, whether the Fed could move away from a fixed inflation target to an average target. In practice this would mean far less sensitivity to upside surprises in inflation during this economic cycle.
The Republican National Convention contains a keynote from Donald Trump on Thursday – investors will be looking for any China hawkishness as the November election approaches
In terms of speeches, Donald Trump will be giving his main speech on Thursday at the Republican National Convention. However, with Trump to appear on every night of the convention, there is the possibility that this could generate volatility. On both national polls and betting odds there is a significant gap between Joe Biden and Donald Trump opening up, which increases the risk of escalating rhetoric as November approaches. Markets will be looking particularly closely at any proposed actions around China hawkishness which could impact the bull run in US equities over the last month. With just ten weeks to go until the 3rd November election date we continue to expect this to be the primary source of market volatility.
US Fiscal stimulus talks appear at a stalemate with the Democrats and White House still far apart. This continued disagreement makes it even less likely that an agreement, even a ‘skinny’ deal, will be reached ahead of the return from Congress’s recess in September. US politics will remain the market’s focus but closer to home, Brexit trade talks continue to generate an impasse, particularly over the ‘level playing field’ and fishing rights.
Another quick update from Brooks Macdonald, the weekly market updates are useful in providing a short summary of events from around the world over the past week.
Please continue to check back for our regular blog posts and updates.
Charlotte Ennis
25/08/2020