A look back at a record-setting August
August brought a wealth of interesting data points and storylines that influenced various markets across asset classes. Throughout the month, S&P 500, Nasdaq-100, gold and silver reached new all-time highs, while the volatility remained relatively low. We also witnessed major foreign currencies rallying due to the U.S. dollar’s weakness, and the crypto space experienced back-and-forth volatility, with bitcoin and ether hitting all-time highs before retreating. In September, a plethora of information has the potential to reintroduce volatility, and the economic data could be the catalyst.
The U.S. saw a significant number of important economic reports that shaped market sentiment and influenced expectations for Federal Reserve actions.
GDP and inflation: The U.S. Commerce Department revised its Q2 GDP estimate, showing stronger growth at an annual rate of 3.3%. However, the Federal Reserve's preferred inflation indicator, the Core Personal Consumption Expenditures (PCE) price index, edged up slightly, with the year-over-year rate increasing to 2.9% in July.
Labor market and consumer confidence: The labor market showed signs of softening, with the unemployment rate ticking up, and revisions to previous months' job growth figures indicating a significant slowdown in hiring. These developments contributed to a decline in consumer confidence in August.
Will September bring anticipated volatility?
August saw many markets reach or approach all-time high prices. For several months, traders have been anticipating the impact of interest rates on the market, and it seems we have finally reached that point. In September, a wealth of information could add the volatility we saw back in April into the market, with economic data potentially sparking it.
U.S. Federal Reserve Meeting: The most anticipated event of the month is the Federal Open Market Committee (FOMC) meeting on September 16-17.
Non-Farm Payrolls and unemployment rate: The U.S. Bureau of Labor Statistics will release the August jobs report on September 5. This data is particularly crucial, as recent reports have shown a slowdown in hiring. Any further weakness could reinforce the case for a Fed rate cut.
Consumer Price Index (CPI): The August CPI report, released on September 11, will be a key indicator of inflation. Following some upward pressure in July, a cooler inflation reading would likely strengthen the argument for a more accommodative monetary policy.
Producer Price Index (PPI): The August PPI report, due on September 12, will provide insights into inflationary pressures at the wholesale level.
Overall, several markets will be in the spotlight as we move into September. One of the main questions is where and when we will see heightened volatility. Traders will be closely monitoring the strength in markets like S&P 500, Nasdaq-100, gold and silver to see if the current momentum will continue or if a cooldown period will begin as we wrap up Q3 in September.
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