While corporate earnings season was in full swing, macroeconomic data reshuffled the deck late in the week. Between a stronger-than-expected U.S. GDP rebound, persistent inflation, a cooling labor market, and renewed trade risks following new announcements from Donald Trump, markets are once again on edge as they refocus on economic fundamentals.
?? Latest Macroeconomic Developments
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Stronger-than-expected U.S. growth
U.S. GDP for the second quarter grew more robustly than expected, signaling an economy that remains resilient despite high interest rates. This rebound casts doubt on the likelihood of a rapid rate cut by the Federal Reserve. -
Inflation still elevated
Recent data confirm a renewed rise in core inflation, reinforcing the more hawkish tone adopted by Jerome Powell during Wednesday’s Fed meeting. The central bank signaled that monetary easing is unlikely to be rushed. -
Labor market showing first cracks
It was Friday’s jobs report that truly moved the markets. Downward revisions to job creation for May and June suggest a cooling labor market, a key factor in shaping the Fed’s next policy moves. -
Trump revives tariff risks
Former President Donald Trump delivered on his August 1 commitment by announcing new country-specific tariffs. While these measures will only take effect on August 7, they reopen a front of trade uncertainty. Markets are closely watching the upcoming week of negotiations, particularly with China, Europe, and Mexico.
?? Analyst Recommendations
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Equities: cautious positioning
Analysts maintain a cautious stance in light of increasingly mixed macroeconomic signals. Growth resilience is being offset by signs of labor market weakness, while sticky inflation complicates the Fed’s job. In this context, risk assets may experience heightened volatility in the weeks ahead. -
Bonds & rates: wait-and-see mode
The bond market remains on hold for upcoming economic data, especially on inflation and employment. A September rate cut remains plausible but far from guaranteed. -
Currencies: short-term dollar strength
The Fed’s hawkish tone is temporarily supporting the dollar, though a reversal could occur if upcoming indicators confirm labor market deterioration. -
Overall view: heightened volatility
Macroeconomic factors are back in the driver’s seat, with conflicting signals creating uncertainty. Investors will need to navigate between hopes for monetary easing, resilient growth, and the renewed threat of trade and geopolitical risks.