August Market Commentary 2022

Economic background Q2 GDP data released in August generally surprised to the upside, however, forward looking business and consumer indicators added to growing evidence of a global growth slowdown.

While lower commodity prices pointed to an easing of global inflation pressures, higher regional gas prices are seeing European inflation and forecasts continue their ascent. Central banks re-asserted their commitment to bringing down inflation, even if this is delivered via economic recession, sending interest rates, and sovereign bond yields higher, weighing on both equity and bond prices.

While labour market strength, and resilient consumer spending, will prevent the National Bureau of Economic Research from declaring the US is in “recession”, a second successive quarter of negative growth in Q2 suggests the economy is carrying little forward momentum. Global Growth forecasts have fallen further, and recession risks are high, as falling real incomes and higher costs weigh heavily on consumer and business sentiment.

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