Stocks in the U.S. kicked off September on a positive note after recording their best month of August performance since 1986. The Federal Reserve concluded its framework review last week with a speech from Fed Chair Jerome Powell at the annual Jackson Hole Symposium. The highlight of the speech was the Fed’s adoption of average inflation targeting, lending flexibility to the Fed allowing them to target inflation above 2% following periods of persistently under-target inflation (less than 2%). It was also noted that the Fed will take an asymmetric approach to the employment side of its dual mandate going forward, whereas they may allow unemployment to run below the Fed’s long-term estimates without tightening monetary policy. On the economic front, Institute for Supply Management showed strength on all fronts this week. The overall reading, new orders, and employment all surprised to the upside signaling rapid recovery in the U.S. economy. Factory orders increased by 6.4% in July, with upward revisions in core capital goods orders and shipments. The ADP reports showed August payrolls coming in lower than expected, however, the report also indicated that leisure and hospitality added about 129,000 jobs during the month – a breath of fresh air for these beaten down sectors. Interest rates drifted lower earlier this week, following a spike higher at the end of August. The yield on the 2-year and 10-year Treasury notes are currently trading around 0.14% and 0.65% respectively mid-week.
Source: Morningstar, CNBC, Bloomberg, GSAM