The NEI team looks at the equity and bond market pullback in August, persistent elevation in the U.S. and risks to global growth.
Nowhere to hide as major asset classes declined further
Markets retreated in August as central banks delivered a blunt message that they are willing to risk economic growth to tackle inflation. Global equity and bond markets pulled back from the July rebound and repriced lower as it became evident that there could be some “pain for businesses and households” in the near term.
Headline inflation may have peaked, but core inflation remains elevated
Headline inflation may have peaked in the U.S. as commodity prices continue to roll over and supply chains improve. However, core inflation remains unacceptably high across most regions due to wage gains and housing, for central banks to consider pausing rate hikes.
Rising risk of a sharp downturn in China threatens global economic growth
China has been plagued by several headwinds which have hampered economic growth: from a severe property sector slump and global consumption rotating from goods to services, to numerous Covid outbreaks and lockdowns. China has cut lending interest rates and recently launched a broad stimulus plan in hopes of stimulating credit demand and economic growth.