Economy
- It was a tough week for global financial markets as slowing economic growth and high inflation globally raised recession concerns worldwide.
- U.S. economic growth contracted by a 0.6% annualized rate during the second quarter of 2022, as measured by gross domestic product (GDP). This marks two consecutive quarters of negative GDP, which meets a widely cited—but unofficial—definition of a recession. Many economists reserve designations of recession for sharper declines that last for more than a few months.
- Nevertheless, consumer spending, which drives nearly 70% of U.S. economic activity, advanced by 0.4% in August (as measured by the personal consumption expenditures price index). This appears to be a combination of wage inflation (consumers have more money) and price inflation (goods cost more to purchase). Many economists and market watchers expect spending to fall if current economic conditions persist.
- U.S. home prices fell by 0.3% in July—registering the first month-over-month decline in almost two years—while year-over-year price gains slowed to 15.8% from 18.1% in June (as measured by the S&P CoreLogic Case-Schiller U.S. National Home Price Index).
Stocks
- U.S. equities once again set new lows on a year to date basis.
- Energy was the only positive sector, bolstered by robust demand. Utilities and information technology stocks suffered during the week.
- Growth stocks again beat again value stocks large caps continued to outperform small caps.
Bonds
- The U.K. was the center of the bond universe as the new government’s budget stoked inflation fears and crushed bond prices. The central bank intervened, announcing a plan to purchase long-term bonds in order to drive down interest rates and calm markets.
- Global bond markets fell on the week as yields rose. The yield on the 10-year U.S. Treasury note briefly hit 4% for the first time since 2008.
- Global government bonds led, followed by global corporate bonds and high yield bonds.
