Week ending 30 August 2024
Promising data releases seen in the US: suggesting they’re likely to avoid recession.
Weekly Market Commentary
Week ending 30 August
Contrasting signs in the EU: key economies shrinking, but more interest rate cuts could come.
Nvidia’s constant battle with strong expectations: can the share price continue to rally as it has since the start of 2023?
Welcome to our weekly market update. Our focus is on providing clear, concise insights into stock and bond market movements and the broader economic landscape. The views expressed here are subject to change without notice and we can’t accept any liability for any loss arising directly or indirectly from any use of it. This is for your information only. It is not a recommendation or advice, if you’re unsure about anything please speak to your financial adviser.
Market Review
To begin the week, markets digested what came from the Jackson Hole Symposium (an international conference hosted by the Fed, attended by many central banks) last Friday. Fed Chair Jerome Powell noted in his speech that “the time has come for policy to adjust”, supporting investor views that they’ll begin reducing interest rates in September. There was particular focus on employment, with the Fed not welcoming “further cooling in labour market conditions”. This appears to be a change to recent thoughts, where both inflation and employment numbers together were key to their thinking.
Fed officials would’ve been pleased to see this week’s initial jobless claims report, which remained steady at 231,000. Gross Domestic Product (GDP) was up to 3.0% (from 2.8%), supporting the view that the US will avoid sliding into recession. This is a different story to Europe, with the German economy shrinking by -0.1% in Q2 and UK retail sales falling for a third straight month. Another decline is expected in September. The European Central Bank (ECB) has noted the good progress it has made in cutting inflation back to its 2% target, but has been careful not to declare victory just yet. Markets are expecting the ECB to cut rates at least twice by the end of the year. The monthly inflation report from Germany has added credit to this view, reaching its lowest level since 2021 (2.0%).
Outlook
Central banks are warming to the idea of interest rate cuts. The Fed hinted that its first rate cut could come in September, and markets now assign a 100% probability of this happening. Investors and central banks alike continue to focus on key data points that could provide insight into the relative health of economies, while corporate earnings will be in focus as well.
Chart of the Week
The weight of expectation on Nvidia. Nvidia, the chipmaker at the heart of the Artificial Intelligence (AI) boom, is coming off a string of quarterly reports that have significantly surpassed
analysts’ expectations, despite those expectations constantly rising. This has caused a sharp rally in the company’s share price, making them one of the most valuable companies in the world. Most of the growth Nvidia has seen is
concentrated in a relatively small number of customers, with around 40% of their revenue coming from the likes of Google and Meta, who are investing billions in AI infrastructure. The revenue
outperformance this quarter was the smallest relative to expectations in six quarters. Guidance suggests that growth will still be strong but not what has been seen since the start of 2023.
What This Means for You
With the latest updates and probability of imminent interest rate cuts seen across the globe, there’s continued evidence that maintaining a well-diversified, long-term
thinking to your investment approach rather than reacting to market swings is key. By staying committed to carefully considered plans, investors can navigate through periods of volatility and uncertainty.
Has provided the commentary within this document.
