Weekly Kick Start | 2 September 2023

As we wrap up the final week of August, markets are increasingly confident in a soft-landing scenario. There is also growing optimism regarding potential support from the Chinese government to address the property market downturn. In notable crypto news, a US Court has reversed the SEC’s decision on Grayscale’s ETF. Here are the key takeaways to kick start your week.

On Top of Our Mind This Week: What does the job market say about the US outlook? 

Source: CNBC, US Bureau of Labour Statistics, 1 September 2023 

A Job market in slowdown mode: After a period of rapid expansion, the US labor market is now settling into a more sustained rhythm. In August, we saw the unemployment rate increase to 3.8%, its highest since February 2022. But here is an interesting twist: this happened alongside a rise in the labor force participation rate. It seems more people are rolling up their sleeves and diving back into the job hunt.

Back to work: The labor force participation rate rose to 62.8%, the highest since February 2020, just before the COVID-19 pandemic happened. You may have heard the term “Great Resignation” tossed around a lot in 2021 and 2022. Many people were waving goodbye to the workforce, creating some real headaches for industries in dire need of workers. This drove wages up and stoked the flames of inflation. Current data suggests a possible reversal of this trend.

Sectoral Disparities: The healthcare sector took the lead in job gains, while transportation and warehousing experienced losses. These disparities reflect the broader shifts in the economy and changes in demand across sectors.

Wage Growth and Inflation: When it comes to average hourly earnings, we did not see a dramatic climb. In fact, this muted rise could be a hint that inflation’s intense grip might be loosening. The hourly wage growth edged up by 0.2% for August month-on-month and is 4.3% higher year-on-year. The number is slightly lower than consensus expectation, another sign that inflation is taking a breather.

Bottom line: So, about that “soft landing” investors have been chatting about? August’s job data seem to be pointing in that direction. For those scratching their heads, a “soft landing” is essentially when the central banks put the brakes on to combat inflation, but without throwing the economy into a recession.

The job data, coupled with the Personal Consumption Expenditure (PCE index) reported on Thursday, suggests the economy’s growth remains resilient with consumers still eager to spend. Yet, the labor market is beginning to relax from its historically tight conditions, and inflationary pressure is easing.

And what does all this mean for our investments? In a soft-landing scenario, the controlled slowdown often results in reduced volatility across many asset classes, leading to generally stable or positive performances.

Market Recap This Week 

Global equities and bonds stabilised last week, with markets responding positively to indications of moderating inflation and a relatively stable job market. In China, there were encouraging signs as policymakers introduced a series of easing measures across property, monetary, and fiscal policies. Furthermore, the PBOC indicated its intention to decelerate the depreciation of the RMB

In the crypto realm, there was buzz about the US Court overturning the SEC’s decision to block Grayscale’s ETF. This landmark ruling is not just a win for Grayscale; it could also set the tone for financial giants like BlackRock and Fidelity, who are eagerly awaiting the SEC’s verdict on their respective spot Bitcoin ETF applications. Bitcoin prices soared following this news, but gave back most of the gains later last week.


Source: Bloomberg, Syfe Research, 2 September 2023 

What is on the Radar for This Week? 

In the coming week, we will be closely monitoring Speeches by the Fed Officials throughout the week to understand more about the upcoming FOMC meeting on 19/20 September. 

Another data point to look out for is China’s foreign reserves and trade balances (7 September), which offer a glimpse into China’s economic condition.

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