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. Equities Decline as Treasury Yields Rise

      The recent increase in Treasury yields, as a result of stronger economic data, caused a decline in equity prices. However, positive news regarding jobless claims, which fell to their lowest level since February, and a strong ISM Services reading suggested a potential upturn in economic activity. The energy sector fared better due to Russian and Saudi oil production cuts, which boosted Brent crude prices to over $90 per barrel. On the other hand, Apple, the largest holding in both the S&P 500 and NASDAQ 100, experienced a significant drop of almost 6% following news of China’s ban on the use of iPhones in certain government-related sectors.

   2. Equity Bulls Off to Rough Start in September

      Suffice it to say that September has not started well for equity bulls. Despite recent price trends being less than ideal, a stronger-than-anticipated economy and an increase in energy costs do not justify reducing equity investments. Rather, these factors are expected to cause short-term fluctuations and may alter the recent winning and losing trends in the global equity market.

   3. CPI Release and Labor Negotiations in Auto Sector Drive Inflation Conversation

      On the inflation front, rising energy prices contributed to an increase in the headline August CPI data. Core CPI , excluding volatile food and energy, also accelerated slightly from the prior month. However, we believe the August CPI results won’t sway the Fed’s September decision (no rate change is expected); it could alter policy from November onward. Further, we are watching the labor negotiations in the auto sector for broader potential implications for wage inflation. An ECB policy meeting, US retail sales, and monthly data from China will round out a busy week.

What Happened Last Week?

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

• Treasury yields rose, and stocks fell due to robust data during a shortened trading week.
• Apple’s market capitalization lost $200 billion from news involving China and the use of iPhones.
• Brent crude oil ended the week above $90/barrel for the first time since November of last year.

What We’re Watching This Week

Here is a recap of what we’re watching for this week:

• This week, the August Consumer Price Index (CPI) is the most significant data release. Related inflation data points include wage inflation read-throughs from the UAW negotiations.
• Retail sales figures for the US and China will give insight into consumer spending in the world’s largest economies.

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