4th September 2023
Perspective News, The Cambridge Weekly
The Cambridge Weekly – 4th September 2023
New school term has the US back at the top of the class
Summer is officially over, but we are none the wiser regarding the direction of the economy. Or are we? Well, we quite likely are, but just a bit and not enough to know if next month’s equity markets will be higher or lower than right now.
We will write about August’s asset class performance in detail next week, as data gathered at the beginning of the month is usually still somewhat unreliable. Nevertheless, the broad outturn was slightly negative with US stocks ending the month unchanged. India was the best performer by a very slight amount, but perhaps more importantly, it has shown a lot of price stability recently with the underlying economy doing well especially in export terms. This is somewhat different to other Emerging Market nations which have been more impacted by a slide in global goods trade. We write about India in the second article this week.
Life and debt: an era of high public borrowing
At their annual mountain retreat the previous weekend, central bankers got existential. The conference in Jackson Hole, Wyoming – described by the New York Times as the economists’ version of the Cannes Film Festival – saw policymakers mulling over not just immediate issues but the future of the global economy. According to European Central Bank (ECB) President Christine Lagarde, worldwide trends toward tighter labour markets, regionalisation and the green transition have fundamentally changed the way monetary policy works. In her words: “There is no pre-existing playbook for the situation we are facing today – and so our task is to draw up a new one.”
Emerging markets – if not China, India?
Emerging Market (EM) investors have had a stressful year. China has dominated the EM commentary once again, as it so often does, but this time around with growth disappointment unwinding the market’s initial optimism.
Equity moves have been stop-start since the beginning of the year. MSCI’s Emerging Market index is currently down over the last six months, following a notable sell-off through August. The Chinese government promised yet more support at the end of July, but investors were perturbed by the lack of policy urgency amid a clear slowdown. The latest figures show that China’s manufacturing sector contracted for a fifth consecutive month (albeit by as much as in June).