Asset Management Weekly Market Commentary

Market updates for the week ending October 4, 2024

Key observations

• There were few places to hide outside of emerging market stocks last week as rising tensions in the Middle East pushed energy prices higher and weighed on investor sentiment and risk appetite. A series of U.S. economic data releases were better than expected, broadly speaking, creating uncertainty surrounding the path forward for economic growth, inflation, and monetary policy, contributing to heightened interest rate volatility in the process.
• Markets in mainland China were closed for Golden Week, but Chinese stocks traded in Hong Kong continued to rally and the MSCI China index is now higher by over 36% in the past month. While we remain constructive on emerging markets broadly and believe China’s stimulus efforts will put a higher floor under global economic growth, we question the sustainability of the rise in Chinese stocks as much of the move appears to have been driven by short covering, and the rally in the U.S. dollar in recent weeks could also pose a headwind to this cohort of stocks.
• Bonds had a rough week as encouraging economic data releases created uncertainty surrounding the outlook for U.S. growth and inflation, putting upward pressure on U.S. Treasury yields. Lower yielding and more interest rate sensitive U.S. Treasuries and investment grade corporates fared poorly on an absolute and relative basis while riskier high yield bonds and emerging market debt also gave ground but performed well due to higher yields and/or shorter maturity profiles.

What we're watching

• The National Federation of Independent Business (NFIB) small business optimism survey for September is released Tuesday with a reading of 91.9 expected, which would be a modest improvement from the 91.2 reading in August.
• U.S. Consumer Price Index (CPI) for September is released Wednesday. Headline CPI is expected to rise 0.1% month over month and 2.3% year over year after 0.2% and 2.5% readings in August. Core CPI, which excludes food and energy, is expected to rise 0.2% month over month and 3.2% year over year versus 0.3% and 3.2% readings the prior month.
• The University of Michigan’s Consumer Sentiment Index for October is released Friday with a 70.0 reading expected, which would be basically in-line with the 70.1 reading in September.