The markets are eagerly anticipating a new test as inflation fears continue to haunt investors this summer. The release of the Fed meeting minutes for July at 2 p.m. Eastern on Wednesday will provide clues about the future of interest rates, which have been a major concern. The Fed recently raised its prime lending rate by 0.25 percentage points and indicated that more increases could be on the horizon if inflation remains high. Despite recent data showing a cooling in inflation, the markets remain unsettled.
Investors are particularly interested in the tone of the Fed’s minutes report and whether it leans towards a dovish or hawkish stance. Mary Ann Bartels, Chief Investment Strategist at Sanctuary Wealth, stated that the Federal Reserve may need to continue increasing interest rates due to the stronger-than-expected economy.
Uncertainty surrounding inflation and China’s economic situation has dampened investor enthusiasm. The S&P 500 has fallen more than 3 percent this month, while the Nasdaq has tumbled 5 percent. Bonds have also experienced volatility, with the real yield on 10-year Treasury notes reaching a 14-year high. Rising yields increase borrowing costs for businesses and homebuyers, which negatively impacts economic growth.
Recession predictions remain a concern, with Bank of America’s survey of global fund managers revealing that only four in 10 managers consider a recession to be unlikely.
In other news, Target has slashed its full-year outlook due to decreased consumer spending caused by high inflation. Intel has terminated its $5.4 billion deal with Tower Semiconductor over concerns related to China. Vietnamese electric carmaker, VinFast, went public and saw its shares soar, indicating continued investor interest in EV startups. A bidding war for U.S. Steel has added market value to the company, with Cleveland-Cliffs and Esmark competing for its acquisition.
A legal battle has emerged concerning Donald Trump’s use of Twitter and its implications for the special counsel’s investigation into the 2020 election. Newly unsealed court filings revealed the acquisition of a search warrant to access direct messages from Trump’s Twitter account. The judge penalized Twitter for its delay in complying with the warrant and questioned if the company was trying to establish a closer relationship with Trump.
The interest in artificial intelligence (AI) has led to increased investment and discussions about regulation. Norway’s sovereign wealth fund, the largest stock market investor globally, posted a significant profit in the first half of the year due to AI’s impact on the tech sector. The fund’s leader emphasized the need for companies to appoint board directors with AI expertise, be transparent about their AI practices, and better manage risks. Regulation will play a crucial role, and while voluntary safeguards have been introduced, there are concerns about their effectiveness.
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