Global equities remain strong at the end of the month
The S&P 500 is on track to close its seventh consecutive month with gains after another record close on Wall Street. For many investors, August was a surprisingly strong month for equity markets, with the S&P 500 up more than 3% for the month and the technology-heavy Nasdaq 100 up as much as 4%, marking its third straight month of gains. Markets in Asia performed well, with the MSCI Asia-Pacific Equity Index hitting a more than two-week high. Europe is also on track to finish the last day of the month strong. The dollar weakened again, while the key 10-year US-Treasury yield was trading at around 1.28%. The strong rally at the end of the month was triggered by supportive Fed policies and a very strong corporate earnings season. In Afghanistan, the Taliban celebrated a victory over the US and its allies after the withdrawal of US troops from Afghanistan. Oil prices continued to move sideways as traders assessed the prospect of additional OPEC+ production, while other commodities gained, particularly aluminum and nickel. Bitcoin fell to around $47,000.
The markets reacted exactly as we expected on Friday and continued their positive momentum in the following days. The momentum remains in place for now, and I expect markets to continue to advance in the third quarter as strong corporate earnings and growth rates, combined with the Fed's ongoing stimulus measures and low interest rates, continue to support. Although some sectors such as energy and financials are experiencing temporary headwinds due to slightly lower oil prices and a less steep yield curve, the equity market rally is broad-based. While the technology sector is currently performing stronger, I see cyclical sectors such as consumer discretionary, industrials and real estate performing strongly in September. Traders are now waiting for Friday's key jobs data, which will shed light on the strength of the economy and influence bets on the Federal Reserve's next move on bond tapering. A strong jobs gain will boost the USD by increasing the likelihood that the Fed will take further steps toward tapering bonds. A weak outcome would likely lead to further USD losses. The best outcome for the stock market would be if Friday's NFPs were close or slightly better than expected (+750K jobs).
The markets reacted exactly as we expected on Friday and continued their positive momentum in the following days. The momentum remains in place for now, and I expect markets to continue to advance in the third quarter as strong corporate earnings and growth rates, combined with the Fed's ongoing stimulus measures and low interest rates, continue to support. Although some sectors such as energy and financials are experiencing temporary headwinds due to slightly lower oil prices and a less steep yield curve, the equity market rally is broad-based. While the technology sector is currently performing stronger, I see cyclical sectors such as consumer discretionary, industrials and real estate performing strongly in September. Traders are now waiting for Friday's key jobs data, which will shed light on the strength of the economy and influence bets on the Federal Reserve's next move on bond tapering. A strong jobs gain will boost the USD by increasing the likelihood that the Fed will take further steps toward tapering bonds. A weak outcome would likely lead to further USD losses. The best outcome for the stock market would be if Friday's NFPs were close or slightly better than expected (+750K jobs).