What to watch in the week ahead 7/3

Key takeaways

  • After a temporary respite, the market sold off again this past week on the back of deteriorating consumption numbers, a reminder that volatility has not yet subsided. 

  • A flurry of manufacturing data – factory orders, final durable goods orders and cap goods orders, and purchase manufacturing index (PMIs) – is coming out earlier next week, while Federal Reserve Open Market Committee (FOMC) minutes and June non-farm payroll are likely to be on investors’ agendas later in the week. 

  • Last week, Yieldstreet launched a secured floating-rate loan offering, which supports the acquisition of a specialized car insurer. 

Recession fears

Equities resumed their downward trend this past week, mainly due to the somewhat expected news of a slowdown in retail consumption. While consumer spending has remained strong over the past few months, it was broadly projected to slow down as the extra resources from pandemic relief dwindled and inflation started biting. 

However, this should not necessarily be seen as bad news. An economic slowdown, if correctly managed, can help tame demand-driven inflation, and keep long-term rates under control. Case in point, the rally in US 10-year Treasuries, which are now trading below 3% – a sign investors are increasingly betting that a slowdown or a recession will push the Fed to avoid excessive tightening. 

As we enter the summer, a period usually characterized by lower liquidity, market volatility is likely to continue. The next few inflation readings are likely to be instrumental to give investors clarity on the potential for stagflation, which at this point represents a tail risk. 

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Manufacturing data and Fed minutes

May’s factory orders, final durable goods and cap goods orders will be released early next week, right after the long weekend. In addition, PMIs will also be published on Wednesday. 

Later in the week, attention is likely to shift on Fed minutes, which will likely offer additional clarity on the Fed’s stance after investors priced out approximately 50 basis points from the Fed’s tightening cycle on recession fears. 

Finally, on Friday, non-farm payroll numbers (NFP) are projected to show unemployment holding steady at 3.6%, with average hourly earnings forecast to grow 0.3%, which would suggest real wages decreased in June – a potential additional red flag on future consumption.

ECB minutes will also be out next week, amidst a spike in inflation in the eurozone and substantial odds of a potential recession in the near future. 

Yieldstreet’s launches

With volatility in rates being a staple of current market conditions, Yieldstreet launched a floating-rate loan offering, supporting the acquisition of a specialized car insurer with strong fundamentals and growth potential. The loan rate is expected to be 7% above the 1-month Secured Overnight Financing Rate (SOFR) – which is currently 1.5% and may increase as the Federal Reserve is tightening rates. 

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