Gerald Fitzgerald’s Market Review 31st August

LAST WEEK IN 30 SECONDS...

The trend for August has generally seen sustained gains on global markets with US markets leading from the front. The tech heavy NASDAQ was up 3.4% in a week which saw the US Federal Reserve move to target inflation at an average of 2% rather than a fixed 2%. In this instance, the Fed signalled their comfort with inflation being higher or lower than 2% over periods. Global government bond yields rose on the news with 10-year US Treasury yields rising by 0.09% to finish the week at 0.73%.

The euro added further gains against the US dollar over the week. Despite this, global equities in euro terms finished the week up 1.7%.

THIS WEEK IN 30 SECONDS...

From an economic point of view, the week sees the release of Eurozone inflation on Tuesday whilst Eurozone retail sales updates are due for release on Thursday.

US unemployment updates are due for release on Friday. With the US unemployment rate standing at over 10% at the end of July, investors will be keen to see a continuation in this rate falling further from its April high of 14.7%. Given the magnitude of the US electorate currently unemployed, Donald Trump will be eager to provide support to this cohort be it through encouragement for corporate rehiring or promises of further financial assistance.

MARKET RECOVERIES: A TALE OF TWO REGIONS

High Yield bonds are noted as being sub-investment grade, with the larger yield attainable compensating investors for the larger risk of default. However, thanks to central bank underpinning via a purchasing program initiated by the US Federal Reserve, these bonds have rallied in recent months. High Yield bonds have recovered and are now back in positive territory for 2020.