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Jackson Hole topped off a bullish week

Jackson Hole topped off a bullish week

Headline this week:

Almost all signs pointed to Risk On as the S&P 500 closed the week above 4500 for the first time ever. Energy (+7.4%) and Financials (+3.4%) were the main drivers with Tech (+1.4%) more subdued and Utilities (-2%) bringing up the rear. Crude had another banner week, gaining above 10%, and helped keep the broad energy sector afloat. Commodities, in general, flashed green with Gold gaining 2% and being the underperformer in the precious metals space. Copper (+5%) and Iron Ore (+8%) continued their rebound and even grains got in on the action with Corn (+3.1%) and Oats (+5.5%) leading the way. EM gains outpaced their counterparts in the developed markets as well.

Market Updates:

The US dollar was the worst-performing currency and the commodity currency complex (CAD, AUD, NZD, ZAR) all outperformed. AUD and NZD wiped out almost all the decline from the prior week. In the prior week, the Delta variant concerns drove asset prices lower and caused the RBNZ to push back a rate hike. With the significant rally in FX and Equities, volatility was lower across the board. The US yield curve got steeper on the week after the much-awaited Jackson Hole address on Friday, which yielded little by way of new information. The Fed plans to start tapering asset purchases by the end of the year given the gains in the labour market continue. The start/pace of the tapering is still subject to speculation. The main event of the week ahead will be the NFP (Non-Farm Payrolls) number. It will be a key factor there as the US economy is expected to have added 750k jobs in August with the unemployment rate dipping to 5.2% (from 5.4% last month).Crypto had a tame week by comparison. Bitcoin and Ethereum traded within their recent ranges, closing the week marginally positive. Bitcoin will be looking to take another run at the 50k level soon and the USD weakness seen recently might help it along. Along with the pullout from Afghanistan, Hurricane Ida will dominate the news flow today. Ida hit New Orleans yesterday (on the 16th anniversary of Katrina). This is a Cat 4 storm as of now (5 being the highest on the scale) and the estimate of losses is around USD 40 bn. With a bulk of the global Crude supply chain based around the Gulf of Mexico, supply is bound to be affected. Estimates are that 1.74 mn barrels are taken offline (close to 2% of daily global supply). The broad sentiment appears positive in Asia so far but will be closely monitored to see how it evolves through the day.

By

Kristal Advisors

August 30, 2021

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