Good Morning,
I hope everyone had a great weekend. School buses are back on the road this morning. Where did the summer go?
U.S. equities declined last week as long-end Treasury yields continued to test multi-year highs, even amid intervention efforts by the Treasury. Fiscal deficits, inflation concerns, and significant borrowing needs across governments and the AI ecosystem have continued to drive competition for capital, putting upward pressure on interest rates.
There is discussion this morning that the Treasury could utilize its General Account to fund additional bond buybacks, so I will be interested to see how that develops. In my view, this Wednesday will be particularly important for markets, with the release of July's PCE report, a broad measure of inflation, and Nvidia's earnings announcement after the close. Market momentum will likely respond to both releases, along with former Fed Governor Kevin Warsh's speech at the Jackson Hole Symposium on Friday. Markets are currently pricing in an October rate hike, although expectations had previously favored a September increase.
Despite the headlines, markets continue to demonstrate resilience, supported by strong corporate earnings. All things considered, I remain optimistic, with a preference for a value tilt within equities.
As always, please feel free to reach out with any questions or comments.
Attached is this week's Market Strategy Radar Screen Report from John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management.
Have a great week!