Market Update

As indicated in the provided table, global equity markets faced a challenging week due to the resurgence of coronavirus cases, which exerted downward pressure on share prices.
Nonetheless, as we've previously emphasized, while the spread of the Delta variant is impacting the global economic recovery, it's unlikely to bring it to a halt, given the high threshold for reimposing comprehensive lockdowns.
In terms of economic data, the release of the Federal Reserve's meeting minutes on Wednesday, August 18, 2021, was a significant event of the week. Unsurprisingly, these minutes echoed the sentiments expressed by several Fed officials in July, indicating that if the US economy continues on its current trajectory, policymakers would contemplate initiating the tapering of monetary stimulus in the upcoming months.
We find this development quite remarkable: even before the recent surge in coronavirus cases, US economic growth was poised to decelerate, primarily because the fiscal stimulus measures implemented by the US government were nearing their end. Moreover, given that inflation is showing clear signs of slowing, in line with our expectations, we believe that any hasty and aggressive tapering of stimulus would be an ill-advised policy move.
Fortunately, the Fed minutes are from over three weeks ago, and the situation has evolved significantly since then. In particular, on Friday, August 20, 2021, Robert Kaplan, President of the Dallas Fed, hinted at a shift in his stance on monetary stimulus removal. Notably, Kaplan had previously been an advocate for the swift and aggressive withdrawal of monetary stimulus. This about-face in his position supports our view that a hike in US interest rates remains a distant prospect, a development that bodes well for equity markets, especially in light of the ongoing strong corporate earnings reporting season.
Looking ahead to the coming week, the spotlight will be on Federal Reserve Chair Jay Powell's speech at the Jackson Hole symposium, scheduled for 3 pm (UK time) on Friday, August 27, 2021. Consequently, markets may experience heightened tension and potential volatility throughout the week.
In the interim, key data releases on the horizon include PMI figures for the US, UK, and Eurozone, US home sales, US durable goods orders, and the US PCE (Personal Consumption Expenditures) index, which is the Fed's preferred measure of inflation.