Marketmind: Accelerating US economy will affect markets

A look at the day ahead in US and global markets by Mike Dolan

Far from forecasts of a recession earlier this year, US economic growth may actually pick up in the second half of 2023 – as bond and equity markets seek to reassess long-term inflation and interest rate assumptions.

After Tuesday's July retail sales report, followed yesterday by reports of a surprise increase in US industrial production and housing starts last month, estimates of US gross domestic product for the third quarter are rising sharply.

Although it's often a volatile model, the Atlanta FederalReserve's "GDPNowcast" real-time estimate of GDP growth in the current quarter soared to 5.8% — the highest since January 2022 and more than double from just a month ago.

That compars with official second-quarter GDP growth estimates of an annualized 2.4% — itself a significant surprise — and Wall St forecasters are once again redrawing forecasts. For example, Deutsche Bank on Wednesday more than doubled its third-quarter real GDP to 3.1%.

As China's economy struggles under the weight of the real estate sector, credit and geopolitical concerns — and GDP forecasts there are quickly being revised downwards — US growth could overtake it this quarter.

The implications of such resilience for US activity in the face of a rise in interest rates of more than five percentage points over 18 months has forced many to reassess the sustainable level of interest rates over a given horizon and raise long-term projections.

The Fed itself, judging by the minutes of its latest policy meeting on Wednesday, is still unsure whether it should raise rates again. It has an annual conference in Jackson Hole later this month to adjust any guidelines before it meets again in September.

In the current constellation, there is ongoing bond overvaluation, and yields on 10-year government bonds exceeded 4.3% on Thursday for the first time since October.

And the turmoil in the bond market has unnerved stocks — even though the earnings and interest implications of accelerating growth are competing influences.

After another big loss on Wall St on Wednesday, futures regained some ground today before the bell. Falling oil prices could help as China's woes cut into energy demand forecasts.

Overseas, Chinese shares tentatively stabilized after days of decline, but bourses elsewhere in Asia and Europe were back in the red.

The dollar is the big winner throughout the piece - surging against the Chinese yuan to its highest level of the year despite reports of China's state-owned banks trying to support the renminbi.

The DXY dollar index against developed market currencies rose to a two-month high.

Events to watch on Thursday:

* US Company Earnings: Walmart, Applied Materials, Tapestry, Ross Stores, Keysight Technology

* Weekly US Jobless Claims, August Philadelphia Fed Survey, July Leading Indicator

* US Government Auction 4-Week Bills

In this edition of MarketMind, we delve into the fascinating interplay between the growing US economy and the complex tapestry of financial markets. As the United States experiences a rapid economic acceleration, the reverberations are being felt around the world, causing significant ripples across asset classes. Join us as we uncover the insights, trends, and strategies necessary to understand and thrive in this dynamic environmen

Economic Power Unleash

Explore the factors driving the US economy into overdrive.

Analyze key indicators such as GDP growth, employment rates and consumer spending that drive growth.

Understand the ripple effect of US economic expansion on international trade and investment.

Financial markets caught in the vortex:

Explore how the growing US economy affects the stock, bond and commodity markets.

Reveal the relationship between interest rate hikes, inflation and market volatility.

Find out how market sentiment reacts to changes in economic policy and indicators.

Strategies for Navigating Volatility:

Gain insight into asset allocation strategies to optimize portfolio performance in a dynamic economy.

Learn how to use market volatility for strategic trading opportunities.

Understand the role of diversification and risk management in mitigating the impact of market fluctuations.

Technology, Inflation and Industry Disruption:

Delve into the role of the technology sector in economic growth and its implications for investors.

Explore the complex dance between inflationary pressures and market stability.

Identify sectors poised for disruption and growth as the economy evolves.

MarketMind's comprehensive analysis sheds light on the deep symbiosis between the accelerating US economy and the complex realm of financial markets. As the economy continues its remarkable journey, it is paramount for investors, traders and market participants to be informed and agile. Equip yourself with the insights and strategies provided here to not only weather the storm, but thrive amid the exciting opportunities that lie ahead.

Remember, in the ever-evolving world of finance, knowledge is power, and MarketMind is your compass to navigate the tangled seas of the US economy and its impact on global markets.