The broader market has been shaped by several key factors:
The rising unemployment in the US and the need for the Fed to cut interest rates to prevent further deterioration in the job market is a significant concern.
The bullish sentiment on Wall Street for the second half of the year, driven by expectations of multiple Fed rate cuts, is influencing market dynamics.
The recent earnings season on Wall Street, with mixed results from major banks, also plays a crucial role in shaping investor sentiment.
Equities and Cryptocurrencies: The S&P 500 and Nasdaq experienced a slight decline over the past week, with the S&P 500 down by 0.6% and the Nasdaq by 3.1%. This decline can be attributed to the ongoing anticipation of Federal Reserve rate cuts, as inflation data continues to show signs of cooling. The easing inflation, which rose only 3% in June, has bolstered expectations for rate cuts, potentially as early as September. This has led to a rotation out of high-valued tech stocks into small and mid-cap stocks, as investors seek to capitalize on the broader market rally.
Cryptocurrencies, on the other hand, have shown remarkable resilience and growth. Bitcoin surged by 13.38%, Ethereum by 11.54%, Ripple by 34.99%, and Solana by 18.13% over the past week. This surge is likely driven by increased investor interest in alternative assets amidst the uncertainty in traditional equity markets and the potential for further monetary easing.
Currencies: The USDJPY fell by 3.16% over the past week, reflecting the broader market sentiment towards a weaker dollar as the likelihood of Fed rate cuts increases. Conversely, the EURUSD and GBPUSD saw gains of 1.21% and 0.87%, respectively, as the Euro and Pound strengthened against the dollar. This shift is indicative of the market's anticipation of a more dovish stance from the Federal Reserve, which could lead to a depreciation of the dollar.
Commodities: Gold prices rose by 3.82% over the past week, reflecting its status as a safe-haven asset amidst economic uncertainty and potential rate cuts. Silver, however, saw a decline of 1.67%, indicating a divergence in investor sentiment towards different precious metals. Oil prices remained relatively stable, with WTI down by 0.15% and Brent by 0.4%, as the market balances supply concerns with the potential for slower economic growth.
Bonds and Credit Spreads: Global bonds saw a modest increase of 0.66%, while US 10Y T-bonds remained relatively flat, down by 0.05%. This stability in bond markets reflects the market's cautious optimism regarding future rate cuts and the potential for a more favorable interest rate environment. US credit spreads remained unchanged, indicating steady credit market conditions despite broader economic uncertainties.
Emerging and Developed Markets: Emerging markets experienced a slight decline of 0.35% over the past week, while developed markets saw a modest increase of 0.69%. This divergence highlights the varying impacts of global economic conditions on different regions, with developed markets potentially benefiting more from the anticipated rate cuts and easing inflation.
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” - Paul Samuelson