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Weekly Market Update (August 20, 2023)


After a 21% increase in S&P500 from Jan to July, it dropped 5% in August so far. It looks like investors are taking profit from the market rally. It is also partly driven by the increasing rates and uncertainty in the Chinese economy.

High Yield: 10Y treasury yield hit 15-year high this week. As the economic data are strong, markets expect a higher likelihood of a soft landing. The demand for long-term bonds has decreased while short-term bonds have increased.

Mortgage Rate: The 30Y mortgage rate in the US reached 21-year high at around 7%, while it was still at around 5% a year ago. Buyers are having more pressure on home purchasing, leading to a decline in housing prices and an increase in renting prices.

China: The People’s Bank of China cut its 1-year medium-term rate by 15bps to 2.5% unexpectedly. It is because of the low inflation, weak credit demand, slow recovery and the uncertainty in property sector. Markets expect a 25bps cut in September.





S&P 500















*Data as of market close. 5-day change ending on Friday.



Goldman Sachs: The net leverage level of fund managers dropped in August, while they have room to raise their equity exposure further when the market condition gets better.

UBS: We recommend the laggards with low valuation and scope to catch up. There is more potential upside in emerging markets equities and equal-weighted US indices.

Fixed Income

Goldman Sachs: The equities markets were struggling in the previous weeks. It is partly because of the increase in long-term yields, while we believe that the near-term impact of the increase of treasury supply and YCC policy change is overestimated.

Morgan Stanley: Yield curves have begun to flatten in the previous weeks as the markets expect the front-end rate will be cut soon. They are taking advantage of intermediate-term rates to lock in above 4% return to decrease the reinvestment risk of short-term bonds mature.


Morgan Stanley: Inflation could still be sticky and Fed may not be able to declare victory yet. Although the inflation data seems to be sufficient for the Fed to pause, it could be interpreted as both bullish and bearish.

J.P. Morgan: Markets expected a recession in the US but the risks seem to be priced out. The interest rate sensitivity is lower than expected due to a later maturity wall of high-yield bonds and a higher percentage of fixed-rate debt. Unemployment remains low due to the lower labor participation after COVID.


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This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.


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