Confidence in Soft Landing Returns, Will US Stocks Return to an Uptrend? | Overseas Major Asset Weekly Report
High volatility period may not be over yet
This week (8.12-8.16), the data enhancement boosted the market's confidence in a soft landing of the U.S. economy. The market's bet on a significant 50 basis point rate cut by the Federal Reserve in September has significantly dropped to 25%, with investors believing more in avoiding an economic recession.
The S&P 500 and Nasdaq both rose for seven consecutive days, marking their best weekly performance since October last year and ending a four-week losing streak. The Dow Jones had its best weekly gain since December last year. The S&P 500 rose by 3.93% this week, the Dow rose by 2.94%, and the Nasdaq rose by 5.29%. The Russell 2000 index rose by 2.93%. The VIX fear index fell by 27.34% this week to its lowest level in over three weeks since July 23.
In terms of sectors, the technology and consumer discretionary sectors led the gains, while the utilities, energy, and real estate sectors performed poorly.
Although the pan-European Stoxx 600 index is still below the levels at the beginning of this month, it has largely erased recent sharp declines. The STOXX 50 index in the eurozone rose by over 3% this week, marking its best weekly performance since the end of January.
The U.S. dollar index fell back this week, declining by 0.7% for the entire week, marking its longest losing streak since March.
Ceasefire negotiations in Gaza and weak global oil demand weighed on oil prices, with U.S. oil falling during the week while Brent oil saw a slight increase. A weaker U.S. dollar and rate cut expectations drove spot gold up by 2% to a historic high, breaking through the $2500 mark for the first time and rising by over 3% for the week, marking a third consecutive weekly gain.
Three factors in the future may lead to continued volatility in the U.S. stock market: 1. U.S. stock valuations remain relatively high, 2. Market expectations of the U.S. nearing a rate cut cycle, 3. Some major tech companies' significant shareholders have started selling off. Therefore, the high volatility period may not be over yet. The focus next week will shift to the minutes of the Fed's July meeting and Fed Chair Powell's speech on the economic outlook at the Jackson Hole Symposium, seeking more clues on rate cuts.
