Good morning and welcome to the Weekender for Saturday, August 13, 2022. The dominant theme driving financial markets for the week was peak inflation. At the beginning of July, we suggested that the US economy was close to peak inflation and that markets would look past the inflation boogeyman and focus on the expected landscape behind it. A landscape where the economy begins to soften or slow and the Federal Reserve pauses on its tightening path as rates are normalized. We expect this narrative to continue to play with another stanza being written where corporate earnings begin to stagnate, driven by softening demand and compressing margins.
US equity markets had a remarkable week, rising by 3.3%. The S&P 500 is up 16.7% from its June low. The tech-heavy NASDAQ is higher by 22.5% and the small capitalization Russell 2000 has advanced 22.3%, from their June lows.