20th August – 26th August 2022 | Another week in the markets
|S&P 500||Nasdaq||VIX||DJIA||Russell 1000||NYSE|
|Nifty 50||Gold||Silver||Brent crude||USD-INR||EUR-INR|
This week Wyoming hosts the Jackson Hole Economic Policy Symposium, oil prices turn more volatile, and the euro falls below dollar parity.
- Jerome Powell delivers his Jackson Hole speech
- Oil trade sees a volatile week on account of new economic data
- Peloton Interactive Inc. reports losses for the sixth consecutive quarter
- Citigroup announces closure of consumer and commercial banking business in Russia
- Euro hits a two-decade low against the dollar, and the pound too hovers close to a record-low
Taking stock | Jackson Hole drumroll | Volatoil | Flexing flux | Timely withdrawal | £€$$ | Invest wisely
Wall Street took a hit on Friday after US Federal Reserve Chair Jerome Powell delivered his Jackson Hole speech. He reiterated a tough stance against inflation, and all major indices dropped – the S&P 500 fell 3.37%, Dow Jones slid 3.03%, and Nasdaq dropped 3.94% for the day. Jerome’s hawkish comments led to a broad-based sell-off, and only five stocks in S&P 500 ended up posting gains on Friday.
Jackson Hole drumroll
Jackson Hole is a three-day economic symposium held in Jackson Hole, Wyoming, since 1981. Sponsored by the Federal Reserve Bank of Kansas City, it hosts hundreds of central bankers, economists, financial experts and investors from across the world every year. In his Jackson Hole speech this week, Jerome Powell indicated that the Federal Reserve would continue to fight inflation to bring it down to the 2% goal, which means further interest rate hikes.
The conference, held from 25th to 27th August, was the first one in person since the pandemic outbreak. Each year, a specific topic relevant to the global economy is discussed, and this year it was ‘Reassessing Constraints on the Economy and Policy’. The direction taken by the US Fed tends to set the tone for not just the financial markets but also what the central banks of other countries decide regarding their key economic policies.
Softening gasoline demand in the US, and the possible return of sanctioned Iranian oil exports to the global markets, led to volatile oil trade in the second half of the week. First, data released by the Energy Information Administration on Wednesday revealed that the four-week average of daily gasoline product supplied was 7% below the same period a year earlier.
This weakening demand for gasoline raised concerns about slowing economic activity in the US amongst investors as Brent crude shed $1.88 while US West Texas Intermediate (WTI) crude lost $2.37 on Thursday. On Friday, however, both bounced back after a report by the Commerce Department showed that the economy contracted at a more moderate pace in the second quarter than was initially expected – 0.6% instead of 0.9%. This also helped calm down recession fears.
On Thursday, Peloton Interactive Inc. reported a quarterly loss of $1.2 billion. This makes it the exercise equipment company’s sixth consecutive loss-making quarter. Only a day before, the company’s stock had surged 20% when it announced that it would begin selling its products on Amazon for the first time. However, after reporting its earnings, its shares plummeted by about 15%. In 2020, Peloton’s exercise bikes, treadmills, and connected classes were rapidly gaining popularity with fitness enthusiasts, and the company had reached a market valuation of almost $50 billion in early 2021. However, as gyms started to open up, the demand for Peloton’s products began to fall. As of Thursday, Peloton is valued at just over $3.6 billion.
Starting this quarter, CitiGroup Inc. will close its consumer and commercial banking businesses in Russia. Way back in April 2021, the bank announced its plans to close its retail business in Russia as part of a broader pullback from some of its overseas markets. But after the Russian invasion of Ukraine, it expanded the scope of its exit to commercial banking as well. The US bank, with the largest presence in Russia, has been unable to find a buyer and announced on Thursday that it would be closing its business in the country.
It expects to incur about $170 million in costs over the next 18 months. Citigroup is one of Wall Street’s giants and has been performing better than other top banks in the US in 2022 thus far. In fact, Citigroup’s second-quarter results were among the few that beat Wall Street’s expectations in the banking industry. The bank’s revenue grew by 11%, while its net interest income increased by 14%.
On Tuesday morning, the euro fell to a two-decade low of 0.9903 against the US dollar, falling below parity. Amid soaring gas prices and the overall worsening economic outlook of the eurozone, analysts predict that the currency might continue to slide. And given the vulnerability of the currency and the rising inflation, a recession seems likely.
Euro vs USD over the last six months:
Source: European Central Bank
But the euro is not alone. The pound too is hovering near a 20-year low against the US dollar at around 1.19. With the UK expecting to fall into a recession in the fourth quarter, the outlook is bleak.
Though the markets have been rebounding lately, September may be a bumpier ride for stocks given the Fed’s rate hikes and seasonal concerns. September has traditionally been one of the worst months for the S&P 500 since 1945, and some experts believe that the market index could fall by as much as 10% this September. This is partly due to the fact that investors tend to make portfolio changes, and fund managers tend to sell underperforming positions as they close the third quarter. So, it’s important that you don’t get carried away by immediate market rallies and continue to stick to your risk profile and long-term investment strategy. Also, look at strengthening your portfolio by diversifying your investments. Download the Appreciate App to access a wide range of high-performing US stocks and ETFs!
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