Will this week’s news impact Fed rate hike timing?

In this week’s video update:

  • Several key indexes rally this week—including S&P 500®, Russell 1000® and NASDAQ—likely due to cash yielding 0.25% and 10-year U.S. Treasuries returning 1.5%
  • What are the challenges to the U.S. stock market in the weeks and months ahead?
  • Will recent economic data potentially impact timing of the next U.S. Federal Reserve (the Fed) rate hike?
  • Where investors might find value right now: Emerging markets.

On this week’s update, Senior Director, Capital Market Insights, Johann Schneider meets with Chief Investment Strategist, Erik Ristuben to discuss the week’s market news, as well as where to look for potential value in current markets.

Several key indexes, including the S&P 500, Russell 1000 and NASDAQ, all rallied this week, likely driven by good returns from cash and 10-year U.S. Treasuries. Additionally, this week’s job numbers were strong and wage pressures are starting to grow.

Despite this week’s slight rally, challenges remain for U.S. equities, due to two key factors: U.S. corporate earnings and the slowly growing wage pressure. These two factors are fundamental to U.S. markets’ long-term strength. Corporate earnings, while improving compared to last quarter (as noted last week), are still in negative territory for the third consecutive quarter.  To see a true rally for U.S. equities, corporate earnings would have to be in positive territory for the remainder of the year.

Next, Ristuben reviews where investors might be looking for potential value in the weeks and months ahead and suggests investors focus on evaluating corporate earnings and assets that are currently undervalued by the markets. One such asset to consider, as Ristuben noted last week: Emerging markets.

Lastly is a focus on the much-watched words of Fed board members at this week’s Jackson Hole Conference. Ristuben discusses if comments indicate any change in the likelihood of a December vs. September Fed rate hike.  He notes that a September hike is still unlikely, as he thinks the Fed is looking to employment as its leading indicator for action. Russell Investments strategists still feel a December Fed rate hike is most likely.