Monthly Market News August 2024 - Market Trends

Alexandre Gauthy - Economist

August was a turbulent month for the markets. After a period of weakness at the beginning of August, equity markets recovered a good part of their loss in the second half of the month. Our expert, Alexandre Gauthy, analyses the trends in the markets in August 2024.

Equity markets: a temporary summer correction

The euphoria of the last few months gave way to a panic movement at the beginning of August. Some indexes fell 10% in the space of a few days following fears related to the health of the US economy that resurfaced after the publication of a disappointing July jobs report. The latter reported an increase in the unemployment rate. This employment report comes on top of weak manufacturing figures. The second responsible for the stock market correction is the Japanese yen, which strengthened after Japan's central bank surprisingly raised interest rates at the end of July.

Markets then rebounded when the Bank of Japan ruled out further rate hikes as long as markets remained volatile, and thanks to the release of some economic data in the United States that calmed investors’ recession fears. The backdrop was also improving on the inflation and US monetary policy front. July's inflation figures were in line with expectations, and signalled a continued easing of inflationary pressures. A highlight of the month was Powell's speech at the annual meeting of central bankers in Jackson Hole. The Fed chair stressed that the cooling of labor market conditions was undeniable and that the Fed was not looking for a further deterioration in the labor market. Acknowledging the risks of a further rise in the unemployment rate, the chairman of the Fed said the central bank would do everything in its power to support a strong labor market.

Bond markets: Fall in US bond yields

Bond markets posted positive returns in August due to lower long-term interest rates. Indeed, growing recession fears and the Federal Reserve's more dovish stance have caused bond yields to fall. The fall in yields was more significant at the beginning of the month in the United States than in the eurozone. In the eurozone, services inflation remains too high, which tempers market expectations for future rate cuts by the European Central Bank.

Central banks: The Fed is ready to cut rates

The event of the month was the annual meeting of central bankers in Jackson Hole. Powell sent a clear signal that the Fed would not welcome a further deterioration in the labor market. While a first rate cut in September is fully priced in, the question is whether the Fed will cut rates by 0.25% or 0.50%. The extent of the move will depend on the economic data that will be released between now and then, including the August employment report which will be decisive.

Currencies: The dollar depreciates

The dollar fell 2% against the euro over the month. Expectations of the Fed rate cuts by the markets worked against the dollar in August.

Commodities: Gold price hits a new high

The price of gold (in dollars) continued its uptrend, reaching new highs. The price was supported by the Fed's confirmation at Jackson Hole of upcoming rate cuts and the depreciation of the dollar.

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