Commentary
US investors rejoiced at the news of impeding rate cuts, leading S&P 500 to make record highs. In the index, smaller stocks delivered better results, with S&P 500 equal weighted index outperforming its traditional, market cap-weighted counterpart. The primary catalyst for the positive sentiment was Fed Chair Powell’s speech at Jackson Hole Symposium. Powell noted that the time seems appropriate to adjust the policy, therefore, making rate cuts in the near term more likely. As of now, markets are pricing in roughly 30% chance of a 25bps cut on September meeting.
In Europe, stocks gained the ground as well, fueled by growing hopes that both the Federal Reserve and European Central Bank could cut rates next month. Macroeconomic data also helped European stocks. Eurozone business activity picked up in August after stalling in July, according Purchasing Managers’ Index (PMI). Importantly, the increase in PMI was largely driven by services sector, with manufacturing sector activity continuing its prolonged decline.
