NEI Monthly Market Insights: August 2022

Oct 7, 2022

Nowhere to hide

The month of August was a tale of two halves, as easing price pressures provided support to equities in the first two weeks, but the market lost steam mid-month as hawkish central bank messages caused fears of a recession to reemerge. With tighter financial conditions and rising odds of recession, all major asset classes including equities, bonds, commodities, and high yield credit slid into negative returns, leaving investors with no place to hide. The U.S. dollar was the only haven as it strengthened against most currencies.

The NEI perspective

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 headwinds which have hampered economic growth: from a property sector slump and global consumption rotating from goods to services, to numerous Covid lockdowns. China has cut lending interest rates and recently launched a broad stimulus plan in hopes of stimulating credit demand and economic growth. From NEI’s Monthly Market Monitor for August. Read the full report for more insights.

Read more…

Recent Posts

Aviso Weekly Market Monitor: March 13th – March 17th

Market developments Equities: On Friday the U.S. market gave back some of the weekly gains as major banks put restrictions on trading with Credit Suisse and First Republic dragging the regional banking sector index lower. First Republic got a show of support from the...

Four pillars of investment tax planning

Fully informing the tax strategy for your portfolio You harnessed your spending habits to set aside savings. You researched the investments you deemed worthy of your hard-earned dollars. And now, as you admire your accumulating wealth, there’s a dark cloud ahead...

NEI Monthly Market Insights: February 2023

Markets fatigued in February The sizzling rally in January may have gone too far and markets began to cool in February in response to signals that the economy remains too hot. Central banks may not be done in tightening just yet. Recent surprise in labour market data...

Aviso Weekly Market Monitor: March 6th – March 10th

Market developments Equities: The S&P500 finished the week down over -4.5%, the Nasdaq down -4.7% and the TSX around -4% as the turmoil caused by SVB Financial Group created concern within the banking sector and led to a spike in market volatility as the VIX hit...

Aviso Weekly Market Monitor: February 27th – March 3rd

Market developments Equities: The U.S. market bounced back after a difficult week last week as investors speculate that the Fed won’t raise rates above the peak rates that are currently being priced in. The S&P finished the week up nearly 2% and the Nasdaq around...

Ten things to do with your 2022 tax refund

Spending and saving in helpful harmony Other than those who work in the tax preparation business, no one looks forward to preparing an income tax return – that is, unless you’re expecting a refund! If you’re particularly keen and prepared, the Canada Revenue Agency...