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Markets & Economic Update for August 2022: Persistent Inflation Fuels Uncertainty

David Lundgren, CFA®
August 3, 2022

Each month, senior leaders of Hancock Whitney's Asset Management team discuss the latest news and events that impact markets and the economy.

This month: The difficult economic environment continues, as inflation readings remain very high and the first print of real GDP posted a second consecutive negative reading.

 

Watch and listen to the webinar:

HubSpot Video

 

Key Takeaways:

  • Bond indices produced positive results in the face of another Federal Reserve rate hike. The decline in yields in maturities out to 10 years capped off the best month for Treasury securities since March of 2020. Fueling the rally were bond investor hopes the economic downturn will reduce Fed rate hikes.
  • The Federal Reserve policy committee as expected raised their target rate by +75 basis points at their July meeting. Powell warned another unusually large rate increase could be appropriate at the next meeting but then later added the Fed will slow the pace of increases at some point.
  • In Equity markets, the S&P 500 to post an impressive +9.2% total return for the month fueled by investors’ expectations about peak inflation and peak Fed themes and fairly positive 2Q earnings reports. The rally comes in the face of looming recession concerns that may have a negative impact on corporate earnings going forward.
  • In the face of already growing tensions between the U.S. and China, House Speaker Nancy Pelosi is planning to visit Taiwan this week as part of a visit to Asian nations. If the visit occurs it will likely lead to a response from China.
  • Congress passed an innovation act on a broad bipartisan basis. The plan, known as the CHIPS+ Act, provides over $50 billion in support for the U.S. semiconductor industry.
  • Additionally, Senate Majority Leader Chuck Schumer and Democratic Senator Joe Manchin of West Virginia, took D.C. by surprise announcing the proposed Inflation Reduction Act of 2022, which includes changes to the tax code as well as an extension of enhanced support for Affordable Care Act insurance and renewable energy.

 

The Hancock Whitney Asset Management team is ready to help guide your portfolio through the ongoing market uncertainty. Let us help you achieve your investment goals.

 

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