The CIO office’s view of the week ahead.Jerome Powell’s speech at the Jackson Hole summit of central bankers on Friday helped support emerging markets (EM) after a nervous few weeks, especially in Turkey. While the Fed chairman reiterated plans for the gradual normalisation of monetary policy, he also said that the economy is not at risk of overheating, meaning the Fed is unlikely to accelerate rate rises. This, in combination with Trump’s vocal aversion to a strong dollar (he said last week that he was “not thrilled” by the Fed’s plans for tightening), sent the USD lower, helping EM assets.Some bright news also came from Mexican trade negotiators’ suggestion that they were close to resolving issues that have been holding up talks to renegotiate NAFTA. The People’s Bank of China’s move to
Topics:
Cesar Perez Ruiz considers the following as important: Investment review, Macroview, market outlook, Market review, Weekly View
This could be interesting, too:
Cesar Perez Ruiz writes Weekly View – Big Splits
Cesar Perez Ruiz writes Weekly View – Central Bank Halloween
Cesar Perez Ruiz writes Weekly View – Widening bottlenecks
Cesar Perez Ruiz writes Weekly View – Debt ceiling deadline postponed
The CIO office’s view of the week ahead.
Jerome Powell’s speech at the Jackson Hole summit of central bankers on Friday helped support emerging markets (EM) after a nervous few weeks, especially in Turkey. While the Fed chairman reiterated plans for the gradual normalisation of monetary policy, he also said that the economy is not at risk of overheating, meaning the Fed is unlikely to accelerate rate rises. This, in combination with Trump’s vocal aversion to a strong dollar (he said last week that he was “not thrilled” by the Fed’s plans for tightening), sent the USD lower, helping EM assets.
Some bright news also came from Mexican trade negotiators’ suggestion that they were close to resolving issues that have been holding up talks to renegotiate NAFTA. The People’s Bank of China’s move to stabilise the renminbi also helped to brighten the mood for EM assets. Nonetheless, China-US trade negotiations appeared to make little headway last week. Trade is likely to remain an important risk factor for markets before the US mid-term elections in November. The possibility of more tariffs to come remains high. We continue to monitor portfolio risk and volatility closely and actively.
Powell’s comments that there was “no clear sign” of inflation accelerating much or of the US economy overheating helped developed market equities reach record highs. At the same time, markets chose to ignore question marks over the stability of the US administration as Trump’s closest lieutenants faced judicial problems. With US mid-term elections ahead in November, Trump’s mandate is looking vulnerable. Trump himself believes that any moves to impeach him would cause the stock market to crash. But for the moment, we believe that markets will continue to look through the political noise as long as corporate and economic data remain relatively upbeat.
César Pérez Ruiz, Head of Investments & CIO