I. Performance of Global Equity Indices (in US dollars)
Data source: Bloomberg, compiled by Tiger Brokers
II. Key Market Themes
i. Review: US Inflation and Economic Outlook Improve, Recession Sentiment Reverses, Market Rebounds
Recently, US July inflation data was released, with both CPI and PPI beating market expectations. CPI rose by 2.9% year-over-year, lower than the expected 3%, marking the lowest increase in nearly three years. In detail, core goods continued to decline, while core services remained stubborn, with higher increases in housing and transportation.
On the other hand, recent US economic data has also improved. Retail sales in July increased by 1% month-over-month, significantly exceeding the market expectation of 0.3%! Even considering the -0.2% downward revision of June data, this still represents a strong performance. Meanwhile, initial jobless claims this week totaled 227,000, continuing to be below expectations.
Given such favorable macro data, the market, which had been deeply mired in recession fears, instantly switched to an exuberant mode. Led by major tech stocks, the market not only quickly recovered lost ground but also saw the S&P 500 and Nasdaq nearing historical highs. However, reviewing the entire process, there is something oddly coincidental: market panic sell-off—urgent statements from various parties—strong data support—market sentiment reversal—everything aligns perfectly, raising doubts about whether this is all just coincidence.
ii. Outlook: Frequent Data Revisions Raise Controversy—Is Recession Sentiment Over? How Will the Market Trade Going Forward?
This year, frequent downward revisions of US retail and non-farm payroll data have sparked considerable debate. According to statistics, in the first half of 2024, US non-farm payrolls were revised down by 279,000 in total, averaging a downward revision of 46,000 per month. Historically, markets often focus on data at the time of release, and subsequent revisions, unless particularly exaggerated, generally do not cause significant waves.
We analyzed the annual revisions of US retail data from 2000 to the present. The results show that most of the time, revisions are upward, while downward revisions typically occur during economic turmoil years, such as the 2000 dot-com bubble, the 2007 subprime crisis, and the 2018 US-China trade war, when retail data generally saw downward revisions. Non-farm payrolls exhibit similar patterns. However, this does not imply that US economic data is subject to "manipulation."
Generally, economic data like non-farm payrolls and retail sales are collected through government surveys. Small businesses, which are slower to respond and more sensitive to economic changes, often lead to subsequent upward or downward revisions. Thus, frequent and significant downward revisions in economic data reflect the reactions of small businesses to potential risks.
Overall, the current market is in a phase of conjecture, with overall rhythm being chaotic and reactions rather extreme. We believe that the situation remains under the control of the Federal Reserve. The market's reaction to one or two sets of data may be overblown. Based on historical data, if the Federal Reserve manages to lower interest rates without triggering a recession, the market is likely to continue rising.
Data source: Bloomberg, compiled by Tiger Brokers
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