Key events:
• Stocks back at record highs
• Fed chair’s speech in Jackson Hole
• Czech government bonds available again (Flexi Bond)
Summary of the current situation:
Following minor declines in stocks towards the end of July, we are now back at new record highs. The S&P 500 index is holding around USD 7 700. The Q2 earnings season ended successfully, with corporate profits growing by 20 to 30 % year-on-year. Although the S&P 500 index has a higher valuation, with a P/E ratio of around 30, revenues and profits are growing at a very solid pace.
Oil initially fell to USD 75 at the beginning of August, but rose back to USD 90 during the month. The Strait of Hormuz is still not open, and the situation remains unclear. This is primarily affecting inflation in the USA, which remains above the 3% threshold.
US government bond yields are also rising in connection with this. For example, 30-year yields reached 5.3 %, their highest level since 2006. This signals expectations of higher inflation in the years ahead.
The US central bank will hold its next meeting in September, when interest rates are indeed expected to be raised to as high as 4 %. Fed chair Kevin Warsh also indicated this during his speech in Jackson Hole. If inflation remains at these levels, rate increases will follow.
And how did other assets perform? Gold rose to USD 4 600 during August, but eventually slipped slightly to USD 4 300 per troy ounce.
After several months, Bitcoin finally received a positive boost, rising from 60 000 to its current level of USD 80 000. It may therefore have its steepest decline behind it, with a new growth cycle beginning. However, caution is needed, because if stocks were to suffer larger declines, bitcoin would probably fall below the 60 000 mark again.
The rise was partly driven by the weakening US dollar, rising 30-year yields, and an ongoing rotation into riskier asset classes.
Macroeconomic summary:
Let us now turn to the key macroeconomic indicators, starting with the year-on-year inflation rate in the Czech Republic, which came in at 1.7 % for July. However, higher oil prices are expected to push it back above the 2% threshold in the coming months.
The year-on-year inflation rate in the USA came in as high as 3.4 % for July due to persistently high oil prices. Inflation is clearly proving difficult to bring below the 3% threshold, and this is not expected to happen in the coming months either.
As for year-on-year inflation in Europe, the figure for July came in at
2.9 %. It is even expected to rise above the 3% threshold in the coming months. The ECB is therefore very likely to continue raising interest rates at its upcoming meetings.
Czech Republic:
The year-on-year inflation rate in the Czech Republic came in at 1.7 % for July. However, higher oil prices are expected to push it back above the 2% threshold in the coming months.
Source:www.tradingeconomics.org
Inflationary pressures from higher oil prices and rising property prices persist, and the ČNB could raise interest rates again to as high as 4 % at its next meeting.
The average mortgage interest rate continued to rise in August and currently stands at 5.42 %. Demand for property and new loans remains. Five-year interest rate swaps, on which new rates are based, continue to rise and are reaching the 4.8 % mark.
At the same time, the so-called Flexi Bond has been available again since 24 August. This is a short-term, three-month government bond with a tax-free annual yield of 3.75 %. It currently offers a better return than most savings accounts.
USA:
The year-on-year inflation rate in the USA came in as high as 3.4 % for July due to persistently high oil prices. Inflation is clearly proving difficult to bring below the 3% threshold, and this is not expected to happen in the coming months either.
The US central bank will hold its next meeting in September, when interest rates are indeed expected to be raised to as high as 4 %. Fed chair Kevin Warsh also indicated this during his speech in Jackson Hole. If inflation stays at these levels, rate increases will follow.
US interest rate (current forecast)
The August inflation figures and unemployment data will be important factors, although everything is fine on the unemployment front so far.
The S&P 500 index rose by as much as 2.7 % during August. It is currently holding at new record highs of around USD 7 700.
Europe:
Year-on-year inflation in Europe came in at 2.9 % for July. It is even expected to rise above the 3% threshold in the coming months.
ECB interest rate – forecast
Source: www.www.tradingeconomics.org
The ECB is very likely to continue raising interest rates at its upcoming meetings. This applies particularly to the meeting taking place as soon as 10 September. However, rate increases will also continue throughout next year.
European stock indices edged higher again during August. Specifically, the MSCI Europe index
gained as much as 1.42 % in dollar terms.
