Market overview
In a promising yet trade-light week for global markets, the MSCI All Country World Index rose by 1.7%, bringing its year-to-date gain to 16.0%.
Recent weakness in US markets seems to have subsided, emphasising our stance to stay the course and look towards long-term fundamentals. Large caps increased by 1.5% (19.2% YTD), edging ever closer to record highs as investors seem buoyed by Powell’s announcement of impending rate cuts. A growth index returned 1.3% (22.0% YTD) compared to a value index gain of 1.9% (13.6% YTD), and mid-caps rose a substantial 3.6% (10.4% YTD). A tech-heavy benchmark – which in the first half of the year was the darling of US markets – advanced by 1.4% (19.7% YTD).
In Europe, large caps ended the week 1.5% higher (9.8% YTD). Germany’s large caps added 1.7%, Italy’s 1.8%, and Switzerland’s 1.3%. France’s increased by 1.7%, with the country’s recent Olympic Games driving the services sector output to a four-month high. The euro appreciated against the US dollar, ending the week at 1.12, up from 1.10.
UK markets were on a steadier uptick than their counterparts. UK large caps gained 0.2% (10.8% YTD), while mid-caps rose by 0.8% (10.15% YTD). The British pound strengthened against the US dollar, ending the week at 1.32, up from 1.29.
Oil prices saw a modest increase, with Brent crude rising to US$79 per barrel, driven by supply constraints and geopolitical tensions. Gold prices also edged higher by 0.5%, closing near record highs in US dollar terms US$ above US$2500 per ounce.
Fed rate cut hints boost investor confidence
The major event of the week was Federal Reserve (Fed) Chair Jerome Powell’s speech at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming. Stocks surged at the opening of US trading following the release of his speech’s text, where Powell acknowledged “the time has come for policy to adjust,” suggesting a rate cut at the September meeting. Powell also hinted at the possibility of a 50 basis point (bp) rate cut instead of the usual 25bp.
The release of minutes from the Fed’s previous policy meeting earlier in the week also helped sentiment. A vast majority of participants viewed a September cut as “likely appropriate,” while several had even considered a cut in July, given the growing confidence in recent disinflation and the labour market coming into better balance.
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