Here’s The Asset Guidance Group Outlook for the Week Ahead… 

There isn’t much top-tier economic data this week, but all eyes will be on the Fed’s annual three-day symposium in Jackson Hole, which gets underway on Thursday. Last year Chair Powell warned the inflation fight was far from over, contra to the market’s rate hike expectations at the time. With U.S. Treasury yields now rising sharply at the long end, and the economy and labor market bustling, the question investors have now is not how high rates will go, but how long they will remain high. Powell may strike a more hawkish tone in his speech on Friday than he did at the recent FOMC meeting. The main economic release this week will be August’s global flash PMIs on Wednesday. In the U.S., watch for new and existing home sales, durable goods, and Nvidia’s earnings after the close on Wednesday. Overseas, the BRICS Summit (Brazil, Russia, India, China,
and South Africa) convenes Tuesday through Thursday, with the bloc’s expansion a major agenda item. China’s central bank is expected to loosen monetary policy further by cutting two key prime rates late Sunday night. Japan will release additional inflation figures on Thursday, while Germany’s business climate index is forecast to regress, hinting at a potential Eurozone recession as early as the current quarter. [1]

Recapping Last Week

The August swoon for U.S. equities continued, as rising interest rates and seasonal weakness kept investors on edge. The S&P500 Index slumped 2%+ and has finished lower in 12 of 14 sessions this month. The Nasdaq Composite sank 2.5%, while the Russell 2000 plunged 3.5%. All 11 S&P500 sectors were negative, with communications, real estate, and consumer discretionary all falling 3-4%+. Long-term U.S. Treasury yields reached their
highest levels since 2011, with the 30-year bond settling near 4.38% amid the U.S. dollar’s sustained rally. The strength of U.S. economic data has Federal Reserve officials concerned about sticky inflation that may necessitate further rate increases, as revealed in the July meeting minutes. Retail sales came in stronger than expected in July, and although earnings reports from Walmart and Target were mixed, consumer spending remained robust. U.S. industrial production rose 1% as auto production rebounded, while manufacturing activity expanded in the Philadelphia region for the first time in 11 months. Despite the Fed’s inflation concerns, U.S. consumers expect prices to moderate and rated their personal financial situations the most positively in the past two years, according to a New York Fed survey. Housing starts jumped 3.9% in July, but homebuilder confidence weakened in August for the first time this year as 30-year mortgage rates have soared above 7%, the highest levels since 2002. Internationally, more disappointing
data from China added pressure to global markets. Retail sales fell to +2.5% YoY in July from 3.1% prior, while industrial production missed forecasts at +3.7%. Unemployment rose, and Chinese officials announced they would stop reporting the youth unemployment rate, which has skyrocketed this year. China’s central bank unexpectedly cut several key interest rates and moved to support the yuan as the economic picture deteriorated. Real estate developer Evergrande filed for U.S. bankruptcy protection, nearly two years after its debt crisis began, and a major Chinese asset manager missed repayment obligations, prompting financial contagion fears. Elsewhere, Japan’s economy expanded for a third consecutive quarter and core CPI was in-line with forecasts. In Europe, Q2 GDP showed modest growth of 0.3%, and economic sentiment improved slightly but remained firmly negative. Finally, the UK’s core inflation remained stubbornly high as wages grew at a record pace in Q2, driven by strong services demand. [2]

Chart of the Week:

The Russell 2000 Index (RUT) declined 33% from late 2021 to June 2022, and has been range-bound ever since. It’s a wide range, from $1,650 to $2,000, and there have been five trips from one end to the other. The small cap index was at the upper end just two weeks ago but has since dropped over 7% and is currently sitting midrange at the 200-day exponential moving average. It’s been a steep drop as rising interest rates have hurt growth stocks along with the small and medium sized financial companies that constitute the index’s largest weighting. The MACD dropped into negative territory last week as well, confirming the bearish momentum. If the pattern holds, a trip to the range low may be next, but it would have to break technical support near $1,825 first. Friday’s trading showed potential for a bullish bounce.  Click here to view chart. [3]

Sources: [1] [2] [3] tdainstitutional.com tdainstitutional.com; Any performance data reported by Asset Guidance Group, LLC has been grouped and reported by kwanti.com, imported from TDAmeritrade Institutional, Risk categories as scored by Grable-Lytton test and grouped by like risk tolerance levels; NOTE: individual account performance grouped solely by model classification type in terms of risk tolerance. Individual portfolios include equivalent equities exposures via like models, but many may hold additional investments like structured notes, fixed income investments such as CDs, bonds, and other individually preferred securities. 1-Week risk score denotes overall performance of all AGG client portfolios grouped together by like-risk tolerance scores not by identical investment allocations; [4] [5] Macro Monday (tdainstitutional.com);

*All other Asset Guidance Group analysis, www.stockcharts.com; All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat,0020Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet; Chart from Indeed’s Hiring Lab.

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