July In Review

Macro Perspectives: Mon 2 Aug 2021

Markets closed out the month broadly flat to accompany the Fed’s dovish message. The US Senate voting to move ahead on the $1.2 trillion infrastructure plan and robust earnings in Europe also supported the risk-on mood.

One of the major talking points near the end of the week was the US GDP report for Q2. The largest economy in the world grew at a 6.5% annualised rate in the second quarter of 2021. Although this was below the 8.5% expectations, it was still the biggest increase in growth seen since the third quarter of 2020.

Caution was the name of the game on Friday as China’s regulatory crackdown continued to spook investors. U.S stocks fell, registering losses for the week after e-commerce giant Amazon late Thursday reported disappointing quarterly results.

Nevertheless, the $SP500 (previous chart above) has ended July with another month of gains.

In other news, the core PCE which is the Fed’s favoured measure of inflation edged higher to 3.5% in June from 3.4% in May – its biggest increase since July 1991.

Looking at commodities, $GOLD found itself under pressure at the end of the week thanks to a strengthening dollar. However, the precious metal was able to end July with a monthly gain. Renewed signs that the Federal Reserve may not taper anytime soon may sweeten appetite for the precious metal in the new month.

With prices back below the 200-day Simple Moving Average, bears could still return to the scene.