US

We struggle to recall a more eagerly awaited US labour market report than that published last week. Stakes were high given the previous report showed a steep rise in unemployment and caused market mayhem in early August, but anyone hoping for a conclusive picture was left disappointed as a mixed set of figures left the strength of the US economy open to interpretation.

Any market participants hoping for a quiet few days to ease back into “work mode” after the summer break have had to rapidly adjust their expectations.

Given almost half of the world’s population resides in a country staging an election this year, 2024 was always likely to throw up a series of political headlines.

In his headlining speech at the Jackson Hole Economic Symposium, Federal Reserve (Fed) chair Jerome Powell’s message to the market was clear.

It feels as though market news hasn’t taken a holiday so far this summer. From the US on Wednesday we got the minutes of the Federal Reserve’s (Fed) July 30-31 policy meeting, and revisions to a whole year of non-farm payrolls (NFP) data from the Bureau of Labour Statistics (BLS).

The title of this year’s Jackson Hole Economic Symposium – essentially a short holiday camp for the world’s economists and central bankers – is “Reassessing the effectiveness and transmission of monetary policy”, an important question given the remarkable resilience developed market economies have shown to the sharpest interest rate hiking cycle we have seen in four decades.

Recent US Consumer Price Index (CPI) inflation data brought good news for investors and central banks.

With US economic data driving very large moves in the last few days, we think it is worth highlighting two data releases that were published yesterday. The Institute of Supply Management (ISM) Services and the Senior Loan Officer Survey spoke of an economy that is stronger than some of the recent price action might suggest.

If you were on vacation last week, your holiday blues wouldn’t have been helped when you looked at your screens this morning, given how quickly sentiment has changed, mainly on the back of one data point.

The last few weeks have seen former President Donald Trump establish a lead over current President Joe Biden across polls in the run-up to November’s US election. Even though it is early days and a lot can change before November (including the Democrat candidate), it is worth considering what a second Trump term might mean for the world economy and for fixed income markets.

One of the drivers of the dovish pivot from the Federal Reserve (Fed) in December was the acknowledgement that the risks to the policy outlook had become more two-sided. In other words, while higher rates were still needed to tame inflation, the Fed saw a risk that staying restrictive for too long and risk damaging a labour market that has so far shown remarkable resilience.

The forecast-defying strength of the US economy has been one of the key drivers of financial markets in recent quarters, but as economic prospects diverge, Europe is where we see the better relative value in fixed income today.