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Weekly Market Recap | 8/28/23

What happened last week

  • A choppy week in markets saw small recoveries for stocks and bonds.

  • Fed Chair Jerome Powell endorsed a data-dependent message at his keynote speech in Jackson Hole.

  • Volatility in the AI trade continued as NVIDIA beat earnings estimates and guided higher.

What we’re watching this week

  • This Friday’s jobs report will be the highlight of a busy US economic data week.

  • Inflation readings for Europe and the Fed’s preferred gauge will be in focus for bond traders.

  • Price action in the AI and mega-cap tech trade, and by extension US equities, as signs of exhaustion to recent trends emerge.

Horizon’s Investment Management Views

  • Late August’s lack of liquidity was on full display last week as investors digested Fed Chair Jerome Powell’s updated thoughts on monetary policy and earnings from AI-darling NVIDIA. In the end, stocks and bonds ended the week in the green, a welcome development after a string of tough weeks. But intra-week price action, especially around NVIDIA’s large earnings beat and guidance raise, did little to inspire confidence in the near term. We think investors should continue to brace for market volatility, especially post-Labor Day when trading desks are fully staffed.

  • Powell’s Jackson Hole speech was in line with our expectations, which were for more of the same from the Chairman. There was plenty in the text for the hawks and the doves, but in the end, our main takeaway was that the Fed is watching the data just like the rest of us. A stronger economy means higher rates; a weaker one will usher in lower rates.

  • NVIDIA reported earnings midweek, delivering higher-than-expected earnings and guiding much higher for next quarter. Yet after rallying almost 10% in the post-market session, the stock ended the following trading day up just 0.1% and fell 2.4% on Friday. Some of this counterintuitive price action reflected that NVIDIA was up almost 9% for the week before it reported earnings. Despite this volatility, the NASDAQ 100 rallied 1.7% on the week and bested most major equity indices. But for a stock that has come as far as fast as NVIDIA has, technicals and sentiment matter as much as, if not more than, fundamentals. Last week’s price action has our antenna up that the mega-cap tech trade may be due for a pause in the near term.


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