Hello, Financial Friends! Welcome back to another edition of “The Week Ahead.” As we stand on the cusp of a new week, there’s a palpable energy in the air. The economic landscape is ever evolving, and as always, we’re here to help you navigate through the maze of data releases, policy decisions, and global events that shape our financial world.
First and foremost, let’s talk about the elephant in the room: Jerome Powell’s recent speech at the Jackson Hole symposium. If you’ve been following the news (or even if you haven’t), you’ve probably heard snippets of what the Federal Reserve Chairman had to say. But worry not, we’ve got you covered with a comprehensive breakdown.
Powell’s speech was, in many ways, a reflection of the balancing act that central banks around the world are currently grappling with. On one hand, there’s the pressing need to control inflation, which has been stubbornly high. On the other, there’s the challenge of ensuring that the economy continues to grow and that the labor market remains robust. It’s a tightrope walk, and Powell’s words gave us a glimpse into the thought process that goes behind the scenes at the Fed.
One of the standout points from the speech was the Fed’s unwavering commitment to bringing inflation down to their 2 percent goal. With the rate hikes we’ve seen over the past year, it’s clear that the Federal Reserve isn’t shying away from taking bold steps. But what’s even more interesting is the acknowledgment of the complexities and uncertainties in this journey. As Powell pointed out, there’s a fine line between tightening monetary policy too much and too little. It’s a dance of precision, and the Fed is keenly aware of the nuances.
Now, while Powell’s speech was undoubtedly the highlight, let’s not forget the plethora of economic data releases we discussed earlier. From the Dallas Fed manufacturing index to the anticipated nonfarm payroll employment, the upcoming week promises a wealth of information. Each of these data points, in its own way, paints a picture of where the U.S. economy stands and where it might be headed.
But here’s the thing: numbers and data are just one part of the story. Behind these figures lie real-world implications – for businesses, for families, for investors, and for everyday folks like you and me. And that’s where “The Week Ahead” comes in. We’re not just here to throw numbers at you; we’re here to help you understand what they mean, how they impact you, and what you can expect in the days to come.
So, grab your favorite beverage, settle into your coziest chair, and let’s dive into the week ahead. It promises to be an enlightening journey, and we’re thrilled to have you with us!
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The Hot Zones this Week
The upcoming week promises a flurry of economic data releases and significant speaking engagements from Federal officials. From job openings to GDP revisions, the economic landscape is set to be shaped by these announcements. Here’s a breakdown of what to expect.
Monday, August 28:
– The Dallas Fed manufacturing index for August is anticipated, with the consensus at -19.0, a slight improvement from the previous -20.0.
– Fed Vice Chair Michael Barr will engage in a roundtable conversation with the Confederated Salish and Kootenai Tribes Council. A Q&A session with the moderator is expected.
Tuesday, August 29:
– The S&P Case-Shiller 20-city home price index for June is projected to be +0.9%.
– JOLTS job openings for July are expected to be around 9400k.
– The Conference Board consumer confidence for August is estimated to slightly decrease to 116.8.
– The Dallas Fed services index for August will be released.
– Fed Vice Chair Michael Barr will participate in another roundtable, this time with the Blackfeet Business Council.
Wednesday, August 30:
– The ADP employment change for August is forecasted to be 150k.
– The advance goods trade balance for July is projected to be -$87.0bn.
– The Q2 GDP is expected to see a 0.2pp upward revision, bringing it to +2.6%.
– Other releases include wholesale inventories, retail inventories, and pending home sales for July.
Thursday, August 31:
– Atlanta Fed President Bostic will speak at the South African Reserve Bank’s biennial research conference.
– Initial jobless claims for August are projected to be 225k.
– Personal income and spending for July are expected to increase by 0.5% and 0.7% respectively.
– The core PCE price index for July is forecasted to rise by 0.21% month-over-month.
– The Chicago PMI for August is estimated to rebound to 45.0.
Friday, September 1:
– Atlanta Fed President Bostic will discuss US monetary policy in a panel discussion in Cape Town.
– Nonfarm payroll employment for August is estimated to rise by 149k.
– Other notable releases include the S&P Global US manufacturing PMI, Cleveland Fed President Mester’s speech on inflation, construction spending, and the ISM manufacturing index.
The week ahead is packed with economic data releases that will provide insights into the health and direction of the US economy. From manufacturing indices to employment data, these announcements will be crucial for investors, policymakers, and analysts. Stay tuned to “The Week Ahead” for a comprehensive breakdown and analysis of these pivotal economic events.
Jerome Powell’s speech Review
Jerome Powell’s speech at the Jackson Hole symposium covered a range of topics related to the Federal Reserve’s policies, the state of the U.S. economy, and the challenges posed by inflation. Here are the main points from the speech:
- Fed’s Commitment to Inflation Control: Powell reiterated the Federal Reserve’s commitment to bringing inflation down to their 2 percent goal. He mentioned that the Fed has already tightened policy significantly over the past year and is prepared to raise rates further if necessary.
- Inflation Dynamics: Inflation has decreased from its peak but remains high. The ongoing high inflation was attributed to a combination of strong demand and pandemic-constrained supply. The Federal Open Market Committee’s rate increase in March 2022 was aimed at addressing this.
- Global Factors Affecting Inflation: The effects of Russia’s war against Ukraine have been a primary driver of changes in headline inflation globally since early 2022.
- Core PCE Inflation: Powell highlighted the distinction between headline PCE inflation and core PCE inflation (which excludes food and energy). While core PCE inflation has decreased, it remains elevated, indicating a need for further action.
- Goods and Housing Sector Dynamics: Core goods inflation, especially for durable goods, has fallen sharply. The motor vehicle sector was highlighted as an example of how supply and demand imbalances during the pandemic led to price spikes. In the housing sector, monetary policy effects became evident soon after liftoff, with mortgage rates doubling in 2022, leading to a decline in housing starts, sales, and house price growth.
- Non housing Services Inflation: This category, which includes services like health care and transportation, has seen inflation move sideways since liftoff. However, recent months have shown a decline.
- Economic Growth and Labor Market: Restrictive monetary policy has led to tightened financial conditions, which is expected to result in below-trend economic growth and some softening in labor market conditions. The labor market rebalancing has continued, with labor supply improving and wage pressures easing.
- Commitment to 2% Inflation Target: Powell emphasized that 2 percent remains the inflation target, and the Fed is committed to achieving this over time. However, he acknowledged the challenges in knowing when this stance has been achieved due to uncertainties related to the neutral rate of interest and the effects of monetary tightening.
- Navigating Uncertainties: Powell acknowledged the complexities and uncertainties in balancing the risks of tightening monetary policy too much versus too little. He emphasized the need for agile policymaking and risk management.
- Future Policy Decisions: The Federal Reserve will assess its progress based on incoming data and the evolving outlook and risks. They will proceed carefully in deciding whether to tighten further or hold the policy rate constant.
In summary, Powell’s speech emphasized the Federal Reserve’s commitment to controlling inflation and the challenges posed by the current economic environment. He highlighted the importance of agile policymaking and risk management in navigating these challenges.
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Week’s Numbers
What a rollercoaster of a week for the S&P 500, right? It felt like we were on a financial see-saw, but guess what? We ended on a high note! The S&P 500 managed to shake off its recent blues, climbing 0.82% from the previous Friday. That’s right, we’ve snapped that 3-week losing streak! 🎉
Now, if we zoom out a bit and look at the bigger picture, the index has grown by a commendable 15.21% since the start of the year. However, we’re still playing catch-up, sitting 8.15% shy of that all-time high we witnessed on January 3, 2022.
Oh, and speaking of snapshots, Jennifer Nash has provided us with a nifty chart that captures the index’s journey over the past 5 days. It’s always great to have a visual, isn’t it?
Earnings
Aggregate Estimates and Revisions
- 23Q2 Y/Y earnings are expected to be -3.0%. Excluding the energy sector, the Y/Y earnings estimate is 3.4%.
- Of the 485 companies in the S&P 500 that have reported earnings to date for 23Q2, 79.4% have reported earnings above analyst estimates. This compares to a long-term average of 66.4% and prior four quarter average of 73.4%.
- During the week of August. 28, 12 S&P 500 companies are expected to report quarterly earnings.
Source I/B/E/S data from Refinitiv
Global Spotlight
Guatemala Faces Political Unrest: Following the victory of anti-corruption presidential candidate, Bernardo Arevalo, on August 20, tensions rise as the attorney general’s office seeks to suspend Arevalo’s Seed Movement party. Delivered on August 23 to Congress President Shirley Rivera, this move is seen as an attempt to undermine the president-elect. Observers predict potential public demonstrations in the upcoming week.
Australia’s LNG Sector on the Brink of Strikes: Chevron’s Wheatstone LNG facility workers are set to conclude their vote on August 28, deciding whether to empower unions to strike over pay and working conditions. This comes after workers from other Chevron facilities gave unions the green light for potential strikes on August 24. With Chevron and Woodside Energy controlling 10% of the global LNG supply, any strike action could send shockwaves through international markets.
UK-China Diplomatic Engagements: British Foreign Secretary James Cleverly is slated to meet his Chinese counterpart, Wang Yi, in Beijing on August 29. This marks a significant diplomatic event, being the first visit by a British foreign secretary to China since 2018. High on their agenda are discussions surrounding the Ukraine conflict and the recalibration of UK-China relations. Both nations aim to strike a balance between risk mitigation and sustaining economic ties.
Election Tensions in Gabon and Zimbabwe: Gabon’s general elections on August 26 see President Ali Bongo Ondimba vying for a third term against opposition leader Albert Ondo Ossa. Economic challenges and rising unemployment have bolstered opposition support, leading to fears of a contested result and potential unrest. Simultaneously, Zimbabwe’s recent elections on August 23 have been marred by allegations of voter suppression and violence, with early results suggesting a tight race and the looming possibility of post-election clashes.
Stratfor.com
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