Michelle Cluver
David Beniaminov
In August, U.S. markets posted their first monthly decline since February despite robust economic activity. The month started with a headline-grabbing move when Fitch Ratings downgraded the U.S. debt citing a “steady deterioration in standards of governance.” This change, coupled with the U.S. Treasury’s surprising announcement of increased borrowing, resulted in the 10-year Treasury soaring to 4.36%, the highest level since 2007, before retreating and ending the month at 4.11%. Bond market volatility adversely impacted equity valuations, especially in the tech and growth sectors susceptible to real yield shifts. At Jackson Hole, Chair Jerome Powell continued his hawkish rhetoric, but he did have a positive undertone as he reaffirmed a data-dependent approach to reduce inflation to the 2% target level. By month-end, market sentiment stabilized as the possibility of a soft landing remained largely intact. Job market data from JOLTS highlighted fewer job openings, hinting at a potential easing in the labor landscape, and a possible reprieve from stringent fiscal measures by the Fed.
Internationally equities underperformed U.S. equities over the month, against a stronger U.S. dollar. The Chinese markets fell by -9.0% in August as property challenges weighed heavily on market sentiment and Beijing’s interventions offered little solace. China’s economic wobbles sent ripples across the APAC landscape, with neighboring markets navigating the fallout. In stark contrast, India emerged robust, with its sustained economic optimism setting it apart in a challenging global landscape.