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The sun sets on summer’s rebound

September 9, 2022
clock 12 MIN READ

Summer break ended early for the equity market as the rally that started in June began to cool by mid-August. Stocks then began a concerted selloff that lasted through the end of the month. Developed-market equities led the slide; while emerging-market shares followed a similar path, they ended August essentially flat due to a milder decline.

Market watchers attributed the rally’s reversal to signaling from the Federal Reserve (Fed) that it remains committed to overcoming high inflation despite anticipated economic pain. The Fed’s annual Jackson Hole conference for central bankers once again served as a forum to deliver a forceful message on its priorities. Fed Chair Jerome Powell opened the conference by explaining that lower growth and softer labor markets will likely be the unfortunate costs of hiking rates to fight inflation, and that expectations for a premature pivot to looser policy will probably be disappointed.

European shares tumbled harder than other developed-market regions in August, departing from a recent pattern of U.S.-led market action. U.K. shares also declined significantly, while the U.S. and Hong Kong fared less poorly. Japanese equities suffered the mildest slide among major developed markets. Mainland Chinese shares were slightly positive. 

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