The State of Markets: “Equities: Rally or Reality Check?”
Concerns about a soft US economy have continued to build this week. In particular, while cyclically sensitive sectors have felt the pinch of tight money for the past 2½ years (e.g. housing & manufacturing), the weakness is now spreading to the labour market.
This week’s macro data, in that respect, was ‘jobs heavy’, with job openings on Wednesday; ADP, Challenger job cuts, and weekly jobless claims yesterday; and nonfarm payrolls today. Much of that data missed expectations. As such, US Treasury yields have moved lower across the curve, with 10 year yields trading at 4.07% at the time of writing, i.e. their lowest level since early April (see key chart below).
With the S&P500 making a new record high this morning, the key question is: What’s next? Will equity markets simply continue to make new highs, as yields fall and the Fed loosens policy? Or is there a risk of a growth (and earnings) scare? For detailed analysis please see this week’s ‘Tactical Equity Asset Allocation’ update available to subscribers (link below).
The main macro data point next week will be US CPI for August (due Thursday at 1:30pm London time). Other key US data includes the NFIB small business report (Tuesday); PPI on Wednesday; and the Michigan Sentiment survey (flash September estimate, due on Friday). Elsewhere Chinese credit and money supply data is due on Friday; there’s an ECB policy announcement (and press conference) on Thursday; and Chinese trade data is due on Monday. Please see below for a full list of today’s key macro data and events.
Key chart: US 10 year Treasury yield (%), shown with 50, 90, & 200 day moving averages
Upcoming Important Data/Events This Week:
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Events: |
ECB policy decision (Thurs, 1:15pm) followed by Lagarde press conference (1:45pm). |
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Monday: |
Chinese imports/exports, & trade balance (Aug, 4am). |
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Tuesday: |
US NFIB small business optimism (Aug, 11am). |
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Wednesday: |
US headline & core PPI (Aug, 1:30pm). |
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Thursday: |
US headline & core CPI (Aug, 1:30pm). |
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Friday: |
US Michigan Sentiment (September first estimate, 3pm); Chinese total social financing, new yuan loans, and M0, M1 & M2 money supply (Aug, 12:30pm). |
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Key earnings: |
Adobe (Thurs). |
Key Research
Tactical Equity Asset Allocation No. 260, 4th September 2025:
“Stay Cautious US Equities in ‘Tactical’ Portfolios A.k.a. Froth, Complacency, and SELL Signals”
Despite positive newsflow, US equities have struggled to make meaningful gains since early July. Price action has therefore been poor, on falling volumes, while various indicators have continued to point to bullish sentiment, crowded positioning, low cash weightings, and high levels of risk appetite in global markets (a contrarian SELL signal). On a tactical (1 – 4 month) time horizon, therefore, US equites are tired and vulnerable to the downside.
Our SELL off indicator has been marching higher, and is close to warning of a wave of risk aversion in global markets. Other key downside risks include the ongoing slowdown in the US economy, at a time when earnings expectations are especially high. We therefore continue to favour caution, and recommend staying NEUTRAL US equities, bonds, and cash.
Key North American Macro Data & Events:
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Events: |
Fed's external communications blackout begins (Mon). |
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Monday: |
US New York Fed 1 year inflation expectations (Aug, 4pm); US consumer credit (July, 8pm). |
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Tuesday: |
US NFIB small business optimism (Aug, 11am). |
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Wednesday: |
US headline & core PPI (Aug, 1:30pm); US wholesale sales & inventories (July, 3pm). |
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Thursday: |
US headline & core CPI (Aug, 1:30pm); US household change in net worth (Q2, 5pm); US weekly jobless claims (1:30pm); US Federal budget balance (Aug, 7pm). |
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Friday: |
Canadian building permits (July, 1:30pm); Canadian capacity utilization (Q2, 1:30pm); US Michigan Sentiment (September first estimate, 3pm). |
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Key earnings: |
Synopsys (Tues); Adobe (Thurs). |
Fig B: US headline & core CPI (Y-o-Y %)
Key European Macro Data & Events
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Events: |
Speeches by the ECB’s Villeroy in Zurich (Mon, 5:30pm), Nagel & Villeroy at BIS Event (Tues, 12:30pm & 4:45pm), Kocher in Vienna (Fri, 9am) & Nagel in Frankfurt (Fri, 9:15am); SNB's Schlegel speaks on BIS panel (Tues, 12:50pm); ECB policy decision (Thurs, 1:15pm) followed by Lagarde press conference (1:45pm). |
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Monday: |
German industrial production (August, 7am); German imports/exports, & trade balance (August, 7am); Eurozone Sentix investor confidence (September, 9:30am). |
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Tuesday: |
French industrial & manufacturing production (August, 7:45am); Spanish industrial production (August, 8am). |
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Wednesday: |
Spanish industrial production (July, 8am); Italian industrial production (July, 9am). |
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Thursday: |
German current account balance (July). |
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Friday: |
German headline CPI (August final estimate, 7am); French headline & core CPI (August final estimate, 7:45am); Spanish headline & core CPI (August final estimate, 8am); Italian quarterly unemployment rate (Q2, 9am). |
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Key earnings: |
Inditex (Wed). |
Fig C: German industrial production (Y-o-Y %), shown with recession bands
Key UK Macro Data & Events
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Events: |
BOE's Breeden moderates fireside chat (Tues, 4:15pm). |
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Monday: |
N/A |
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Tuesday: |
BRC retail sales (Aug, 12:01am). |
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Wednesday: |
N/A |
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Thursday: |
RICS house price balance (Aug, 12:01am). |
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Friday: |
Monthly GDP estimate, industrial & manufacturing production, goods trade balance & construction output (July, 7am). |
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Key earnings: |
N/A |
Fig D: RICS housing survey (adv. 6m) vs Rightmove house price index (Y-o-Y %)
Key Asia-Pacific Macro Data & Events
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Events: |
Speech by the RBA’s Jones (Fri, 3am). |
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Monday: |
Japanese GDP (Q2 final estimate, 12:50am); Chinese imports/exports, & trade balance (Aug, 4am). |
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Tuesday: |
Japanese M2 & M3 money supply (Aug, 12:50am); Australian Westpac consumer confidence (Aug, 1:30am); Australian NAB business confidence (Aug, 2:30am); Japanese machine tool orders (August first estimate, 7am). |
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Wednesday: |
Chinese PPI (Aug, 2:30am). |
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Thursday: |
Japanese PPI (Aug, 12:50am); Japanese BSI large industry & manufacturing index (Q3, 12:50am); Australian consumer inflation expectations (Sep, 2am). |
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Friday: |
Japanese industrial production & capacity utilisation (July final estimate, 5:30am); Chinese total social financing, new yuan loans, and M0, M1 & M2 money supply (Aug, 12:30pm). |
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Key earnings: |
N/A |
Fig E: Japanese GDP growth (Q-o-Q %, annualised)
This Week:
Longview on Friday, 5th September 2025:
“UK Debt Dynamics: Vicious Circle?”
Tactical Equity Asset Allocation No. 260, 4th September 2025
“Stay Cautious US Equities in ‘Tactical’ Portfolios A.k.a. Froth, Complacency, and SELL Signals”
Daily Dose of Macro & Markets This week:
Daily Dose of Macro & Markets 4th September 2025:
“Tight Money & Rising US Labour Market Slack”
Daily Dose of Macro & Markets 3rd September 2025:
“UK Gilts – Risks Rising”
Daily Dose of Macro & Markets 2nd September 2025:
“OIL Pain Trade: Higher Before Lower”
Weekly Risk Appetite Gauge:
'Weekly Risk Appetite Gauge', 1st September 2025:
“Fraying at the Edges”
Last Week:
Longview on Friday, 29th August 2025:
“Debt, Reserve Status, and Diverging Bond Markets”
EZ Quarterly Asset Allocation No. 63, 28th August 2025
“Europe: Cyclical Upswing Ongoing”
Daily Dose of Macro & Markets This week:
Daily Dose of Macro & Markets 27th August 2025:
“US Housing: Waiting On The Fed”
Daily Dose of Macro & Markets 26th August 2025:
“Liquidity Headwinds!”
Weekly Risk Appetite Gauge:
'Weekly Risk Appetite Gauge', 25th August 2025:
“Buyer Exhaustion Creeping In?”