- 2nd quarter GDP was revised downward to a 2.1% annualized growth rate, a pace that still exceeds expectations as US economic growth remains resilient
- Federal Reserve policymakers maintained a hawkish stance at their annual Jackson Hole gathering, emphasizing their commitment to reaching the Fed’s 2.0% inflation target
- US inflation has moderated but remains well above the Fed’s goal; headline CPI inflation rose to 3.2% y/y in July – higher than June’s 3.0% but lower than expected – while the core CPI fell from 4.8% to 4.7% y/y
- Consumer confidence remains low given elevated inflation, higher interest rates, and forecasts for a recession, yet continued consumer spending growth has been a key support for the economy
- The labor market continues to show strength, but signs of softening have emerged
- Strong economic data has quieted recession calls in recent months, with more economists now calling for a ‘soft landing,’ however, economic headwinds are building, including the restart of student loan payments, dwindling excess savings, and the accumulating effects of higher interest rates
Non U.S. Economy
- Economic data from Europe has recently lagged that of the US as growth momentum there has slowed and inflation remains stubbornly high in some markets
- China’s post-reopening economy continues to struggle with falling exports, a weak property sector, and the economy experiencing deflation in August
- Central bank policy across economies has become more divergent as a variety of inflation and growth results play out globally
- The global equity rally stalled in August as resilient economic data and hawkish Fed messaging raised expectations for ‘higher for longer’ interest rates
- Recent drivers of market volatility have faded with the US debt ceiling resolved and the banking crisis appearing to be in the rearview mirror
- As asynchronous growth plays out across regions, the risk of inflation and interest rate volatility could also rise
- Investors will have to remain committed to strategic investment programs, while also ensuring adequate portfolio liquidity and flexibility to reposition as the market environment unfolds
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