Please find the next blog in our monthly series that provides a snapshot of the markets and the state of the economy.
- The equity rally stalled in August as the Fitch downgrade of US debt and uncertainty around the path of interest rates weighed on sentiment
- The US job openings survey signaled a cooling labor market, with job openings and the quits rate reaching their lowest levels since early 2021
- Headline CPI rose from a 3.0% annual increase to 3.2%, although this was lower than expected. Core CPI declined slightly to 4.7%
- Bonds outperformed with yields supporting returns as rates rose
- Emerging markets underperformed on China weakness
Asset Class Valuations
- Equities currently priced for a benign economic outcome
- Favor core bonds (US Treasuries) over high yield
- Cash remains attractive with yields around 5%
Key Risk Factors We Are Watching
- Inflation and labor market data
- Tightening financial conditions
- Fed policy mistake
- Downward revisions to corporate earnings
- Ongoing geopolitical tensions
- Weaker than expected China recovery
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