The Lookout | Week of August 22, 2022

The Lookout | Week of August 22, 2022

It’s a packed week for investors as a number of data points crucial to the development of market sentiment will be released in the coming days. In this edition of The Lookout, we’re featuring insights from Hunter Frey of Catalyst Funds, Rational Funds, and Strategy Shares.

Major Market Events:

Tuesday, August 23: US New Home Sales

Wednesday, August 24: US Crude Oil Inventories

Thursday, August 25: ECB Monetary Policy Meeting Publication; US Initial Jobless Claims

Friday. August 26: US Core CPI, Fed Chair Powell to Speak (US)

Hunter Frey, Investment Analyst, Catalyst Funds, Rational Funds, Strategy Shares

While overall economic data continues to be mixed, there are some data points seemingly everyone agrees upon:

1) Inflation remains high

2) Unemployment is low

3) Job openings are high

• Stocks started the week lower with a risk-off trade in anticipation of the Fed’s Jackson Hole meeting on Friday, which remains pivotal for financial markets.
• Friday’s central bank meeting will provide some clarity to the trajectory of inflation and coinciding monetary policy. Inflation dropped for the first time this year in July, driven by a steep drop in energy prices.
• The complexity of a potential dovish shift (supporting a risk-on rally) coupled with the start of quantitative tightening (set to start next month) – which will pull the rug of liquidity out from under risk-on assets – have been the construction of the uncertainty/volatility in markets. The latest MLIV Pulse survey supports the uncertainty in financial markets. This suggests that stocks and bonds may see steep downward price movement amid destabilizing pricing pressures (if economic policy clarity is not obtained).
• Thus, this week’s economic data will remain vital. Here’s what our team is monitoring:
  • Tuesday:
    • U.S. new home sales
    • S&P Global PMI’s
  • Wednesday:
    • U.S. durable goods
    • MBA mortgage application
    • Pending home sales
  • Thursday
    • U.S. GDP
    • Initial Jobless Claims
    • Fed’s annual policy symposium in Jackson Hole, Wyoming
    • ECB’s July minutes
  • Friday:
    • Fed Chair Jerome Powell speaks at Jackson Hole
    • U.S. consumer income
    • PCE deflator