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Cooling economic activity ignites market rebound

August 5, 2022
clock 10 MIN READ

The selloff that shaped the first half of 2022 came to a halt as equities and fixed-income asset classes rallied in July. Stocks and bonds moved sideways during the first half of the month after climbing off a bottom in mid-June, and then recovered at an accelerating pace as the end of July approached.

Data showing softening economic activity counterintuitively provided investors with a confidence boost, as slower growth and milder inflation would likely mean that central banks won’t need to increase rates as much as feared, thereby keeping a lid on borrowing costs.

Equity performance patterns reversed, with U.S. stocks leading major markets after delivering one of the second quarter’s worst performances. Japan also had a large one-month gain, as did Europe; U.K. stocks trailed these markets, but nevertheless benefitted from a large rebound in July. Emerging-market equities, meanwhile, generated a small loss as China’s second-quarter rebound faltered.

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