The six-month period ended last week. Both the weekly and year-to-date index returns were positive. The main driver of this growth has been the technology sector, which is reflected in the divergence between the NASDAQ index, which is up around 32%, and the S&P and Dow Jones indices, which are up only around 15% and 3% respectively.
These returns were partly driven by lower levels at the beginning of the year, with fears about the impact of war, rising interest rates and the high probability of a recession. However, inflation is beginning to come under control, albeit more slowly than expected. Both US GDP and unemployment remain resilient.
Last week also saw the release of the final GDP growth figures for the first quarter, which came as a big surprise to investors, with the US economy growing at a rate of 2% instead of the expected 1.4%. Initial jobless claims data also pointed to a strong labour market. All of this contributed to the possibility of further interest rate hikes by the Federal Reserve, with the market expecting two more hikes this year.
This was confirmed by Governor Jerome Powell at a panel discussion in Sintra, Portugal, where he was joined by the governors of the European Central Bank, the Bank of Japan and the Bank of England. The entire discussion was conducted in a hawkish tone, with each of the bankers expressing a firm stance on fighting inflation. The only exception was the governor of the Bank of Japan, who is not yet planning to raise interest rates with inflation at 3.2%, above the 2% target.
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