The FCMS Investment Committee is pleased to share the latest insights on the current financial market and economic developments.

Market Perspectives

Here are the top things from our FCMS Investment Committee on current financial markets and economic developments:

1. 1. Government Bond Yields Rise Despite Positive CPI Release and Weak Data from China

      Last week, the synchronized sell-off of stocks and bonds persisted through choppy and illiquid trading. Despite a better-than-expected CPI release in the U.S. (although the headline ticked up due to base effects) and very weak lending and inflation data out of China, government bond yields rose across the yield curve, driving the price action. The recent cross-asset price action continues to challenge the dominant market narrative, but light summer trading may be to blame. However, these conditions often dictate new trends.

   2. Global Stocks’ Short-Term Risks Skew Lower as July Gains are Erased

      The short-term risks for global stocks are currently skewed lower rather than higher, as the first two weeks of August have erased all of July’s gains. Intra-equity trends have been volatile and aimless, with both year-to-date winners (the NASDAQ 100) and laggards (the S&P 600 Index) leading domestic declines last week. In the international arena, emerging markets (MSCI Emerging Markets Index) were dragged lower by China as short-term market players discounted incoming data and policy announcements. Non-US shares, particularly those in emerging markets, continue to be weighed down by dollar strength.

   3. Global Markets Await Economic Data, while Domestic Consumer Spending is Carefully Monitored

      The coming week appears to be relatively calm as the earnings season is practically over, and the next significant macro event is the Jackson Hole central banking conference, which is still two weeks away. The week’s drivers are mostly from other countries, notably China’s July activity data release and Japanese and European second-quarter GDP prints. We are keeping an eye on retail sales and earnings reports from major retailers to gauge consumer spending trends domestically.

What Happened Last Week?

Here is a recap of the top things that happened last week:

• Global bond yields surge and commodities rally, increasing disinflation pressure.
• Domestic equities were also lower despite the release of the better-than-expected Consumer Product Index (CPI).
• Emerging markets were impacted by China’s low inflation print and loan growth, which was much lower than expected.

What We’re Watching This Week

• Large retailers’ earnings releases and U.S. retail sales put consumer spending in the spotlight.
• Outside the U.S., we are monitoring China activity releases and developed market second-quarter Gross Domestic Product (GDP) prints.
• Due to the August holidays, market participation will be limited in the upcoming week, resulting in choppy conditions.

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