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MARKET MONITOR 
|
July 29

MARKET MONITOR | July 29

Chart of the Week


EQUITIES

US earnings results have generally remained resilient in 2Q 2022 despite a strong US dollar weighing on revenues. With 56% of companies having reported, 52% have beaten consensus earnings estimates by more than one standard deviation, above the historical average of 47%. While corporate earnings strength may moderate given higher inflation and rates, we continue to favor companies that can maintain profitability and stable earnings growth.

Source: Goldman Sachs Global Investment Research. As of July 29, 2022.

Market Summary


GLOBAL EQUITIES

Global equities jumped last week as markets anticipated that a US 2Q GDP contraction may foreshadow an end to the Fed’s aggressive hiking cycle. In the US, the S&P 500 ended the week up 4.28% as a majority of companies reporting have beat consensus earnings estimates. In Europe, the STOXX 600 climbed to a seven-week high and rose 2.97% with positive news from earnings offsetting the gloomy energy outlook. The FTSE 100 also digested the US GDP print favorably and closed the week up 2.06%. Read More

COMMODITIES

Oil prices fluctuated last week amidst a further reduction in Russian gas supply, rising recession concerns, and relatively stable demand. WTI and Brent crude ended last week higher at $98.62 and $110.01 per barrel, respectively, on the back of US supply constraints. Gold rallied last week following the Fed’s 75 bps rate hike, ultimately finishing up 2.09%. Read More

FIXED INCOME

Global sovereign yields fell last week as expectations for aggressive central bank policies softened. The 10-Year US Treasury yield fell -14 bps to 2.64% on the back of the Fed’s rate hike and negative US GDP growth while the 2-Year yield fell -9 bps to 2.90%, continuing the 2s10s spread inversion. In Germany, the 10-Year Bund fell to two-month lows as recession fears grew over the EU’s emergency plans to curb gas usage. Read More

FX

The US dollar depreciated -0.40% against a basket of currencies as investors digested the Fed’s rate hike, Chair Powell’s dovish comments, and the US economy’s second consecutive quarter of contractions. In Europe, the euro and pound sterling appreciated to $1.0220 and $1.2175, respectively, despite intensifying energy supply concerns fanning recession fears and expectations of a less aggressive ECB. Read More

Economic Summary


POLICY

The Fed made its second consecutive 75 bps interest rate hike last week, bringing the funds rate to 2.25-2.50% and marking the fastest tightening since the Fed battled double-digit inflation in the 1980s. The FOMC indicated that future hikes will be determined on a meeting-by-meeting basis, as inflation remains elevated and recent indicators of spending and production have softened while job gains have been robust and unemployment has remained low. Read More

INFLATION

The Fed’s preferred inflation measure, core PCE, rose 4.8% YoY in June, above consensus expectations and the prior print of 4.7%. In Europe, Euro area flash HICP rose 8.9% YoY in July, above consensus expectations of 8.7%, on the back of broad-based pressures from energy, food, industrial goods, and services. We expect price pressures to remain elevated throughout the year, with particular focus on the supply of Russian gas. Read More

GROWTH

The US economy shrank by more than expected to -0.9% annualized in 2Q 2022 on the back of a decrease in inventories and slowing spending and investment. The print marked the second consecutive negative GDP quarter, meeting a shorthand definition of recession. However, strength in other recession indicators, such as employment, may prevent the National Bureau of Economic Research from officially declaring a recession during the first two quarters of 2022. In the Euro area, 2Q GDP grew 0.7% YoY, above consensus expectations of 0.1% and reflecting a stronger-than-expected post-Omicron rebound. We expect to see a modest downturn as growth moderates in the second half of the year. Read More

LABOR

US Initial Jobless Claims fell 5k to 256k for the week ending July 23, breaking a three-week streak of increases. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
6.63%
9.31%
12.00%
Medium
8.61%
9.87%
12.24%
Small
9.68%
10.44%
11.20%
Value
Core
Growth

YEAR-TO-DATE

Large
-7.08%
-13.58%
-19.44%
Medium
-9.02%
-13.83%
-22.56%
Small
-9.30%
-15.43%
-21.55%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
4.12%
7.90%
11.82%
Medium
6.83%
8.17%
9.84%
Small
7.86%
9.11%
10.43%
Value
Core
Growth

YEAR-TO-DATE

Large
-7.37%
-13.80%
-20.27%
Medium
-11.73%
-16.29%
-22.50%
Small
-9.83%
-15.51%
-21.39%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.79%
1.34%
2.67%
Corporate
1.51%
2.37%
4.81%
High Yield
4.43%
5.87%
6.75%
Short
Intermed.
Long

YEAR-TO-DATE

Government
-3.43%
-4.54%
-19.15%
Corporate
-4.17%
-6.81%
-19.03%
High Yield
-5.71%
-8.51%
-19.10%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.69%
3.16%
8.30%
Corporate
1.68%
5.54%
12.03%
High Yield
5.08%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
-1.65%
-5.86%
-16.44%
Corporate
-2.26%
-9.09%
-16.44%
High Yield
-10.09%
??????
??????
Short
Intermed.
Long

Source: Bloomberg and Goldman Sachs Asset Management (as of 07/29/22)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Aug 01

Euro area Manuf. PMI (Cons: 49.6, Prior: 49.6)
UK Manuf. PMI (Cons: 52.2, Prior: 52.2)
Euro area Unempl. (Cons: 6.6%, Prior: 6.6%)
ISM Manuf. (Cons: 52.0, Prior: 53.0)

Tuesday, Aug 02

US JOLTS (Cons: 11.000M, Prior: 11.254M)

Wednesday, Aug 03

Euro area Composite PMI (Cons: 49.4, Prior: 49.4)
US Services PMI (Cons: -, Prior: 47.0)
ISM Non-Manuf. (Cons: 53.5, Prior: 55.3)

Thursday, Aug 04

BoE Rate Decision (Cons: 1.50%, Prior: 1.25%)
US IJC (Cons: 255k, Prior: 256k)

Friday, Aug 05

Nonfarm Payrolls (Cons: 250k, Prior: 372k)
US Unempl. (Cons: 3.6%, Prior: 3.6%)

VIEW LESS DISCLOSURE

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