August 2024 took investors on a ride, with sharp sell-offs and strong rebounds—learn what drove market performance and what’s next for global equities in EasyAssetManagement's latest report.
Summary
- August began with weaker-than-expected U.S. jobs data, causing a sharp sell-off and reminding investors of how quickly market sentiment can change.
- In the U.S. equities space, defensive sectors such as Financials, Consumer Staples, and Healthcare were among the best performers, driving the S&P 500 higher by 2.4%
- The markets bounced back thanks to favorable inflation reports and hopes for bigger interest rate cuts, with the U.S. economy proving resilient despite volatility.
- While U.S. and European markets saw gains, emerging markets like China underperformed, reflecting regional economic differences that shaped August’s complex market picture.
As the summer months ended, the global equity markets took investors on a wild ride in August 2024. The month began with a sharp sell-off, only to rebound and close at or near all-time highs. Behind the overall gains, however, lay significant volatility and regional divergences that painted a complex picture of the global economy.
Weaker-Than-Expected U.S. Jobs Data
The first week of August saw a sudden and sharp decline in global equity markets, triggered by weaker-than-expected U.S. jobs data. The news sparked a retreat in risk assets, with tech-heavy indices such as the NASDAQ 100 bearing the brunt of the impact. Companies that missed earnings expectations, like Nvidia, were hit particularly hard. The sell-off was a stark reminder that even in a bull market, investor sentiment can turn on a dime.
The Rebound: Favourable Inflation Readings and Central Bank Optimism
However, as the month progressed, attention turned to favourable inflation readings across key regions. Investors began to anticipate more significant interest rate cuts, propelling risk assets higher. The optimism was further boosted by comments from Federal Reserve Chair Jerome Powell at the Jackson Hole conference, where he hinted at the potential for deeper rate cuts in September. This combination of factors led to a continuation of the "risk-on" sentiment, helping most global indices to close the month at or near all-time highs.
A Mixed Bag Across Regions
The inflationary landscape in August was a mixed bag across regions. In the U.S., headline Consumer Price Index inflation dropped for the fourth consecutive month, with July's figure at 2.9% year-on-year, down from 3.0% in June. This bolstered the case for more aggressive monetary easing from the Fed. Similarly, in the Eurozone, inflation declined to 2.2% year-on-year in July, approaching the European Central Bank's 2.0% target, which raised the likelihood of policy easing.
In contrast, UK inflation also dropped to 2.2% but slightly exceeded expectations, while core inflation came in at 3.3%. China, on the other hand, saw annual inflation rise to 0.5%, prompting further stimulus from Beijing to shore up economic activity.
U.S. Economy: Resilience and "Soft Landing"
The U.S. economy continued to display resilience in August, with GDP growing at 3.0% year-on-year in Q2 2024, exceeding market expectations. Although the unemployment rate ticked up to 4.3%, the overall outlook for a "soft landing" remained intact, bolstering market sentiment
Emerging Markets: A Tale of Two Performances
In emerging markets, performance was more varied. Countries like Brazil and Taiwan benefited from stronger equity markets and a weaker U.S. dollar, while China and South Korea underperformed. The MSCI Emerging Markets Index closed the month 1.7% higher, showing more modest gains compared to developed markets.
Sector Performance: Defensive Sectors Shine
In the U.S. equities space, defensive sectors such as Financials, Consumer Staples, and Healthcare were among the best performers, driving the S&P 500 higher by 2.4%. In contrast, the NASDAQ 100 gained only 1.2%, held back by some of the larger tech companies like Microsoft and Alphabet.
Global Equity Markets: A Complex Picture
The performance in August highlights the mixed landscape of global equity markets, where regional economic conditions and policy expectations play a significant role in shaping investor sentiment. As investors look ahead to the remainder of 2024, it's clear that the path forward will be filled with twists and turns. Will the "risk-on" sentiment continue, or will global events spark another bout of volatility? Only time will tell.
Source:Bloomberg
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