In this issue:

• U.S. Jackson Hole Economic Symposium Highlights

• Fitch Downgrades U.S.

• China's Next Act in a Changing Economic Order

• 5 Health Care Costs to Consider in Your Retirement Plans

• Chart Corner

The second half of the summer saw more subdued price action with both equity and bond markets showing a slight decline. Investors’ immediate attention is likely on takeaways from the U.S. Jackson Hole Economic Symposium and third-quarter results from Canadian banks. There has also been deepening concerns over China’s economic health. We discuss recent events below.

U.S. Jackson Hole Economic Symposium Highlights

The annual Jackson Hole Economic Symposium held in Jackson Hole, Wyoming is a three-day conference attended by central bank leaders, finance ministers, and academics from around the world. Federal Reserve Chair Jerome Powell and European Central Bank President Cristine Lagarde discussed some of the challenges they have encountered while balancing monetary policy and the ongoing structural shifts in the economy. With inflation still above target and the uncertain nature of monetary policy transmission lags are among the common themes highlighted by both central banks.

Fed Chair Powell’s remarks remained relatively balanced when addressing the prospect of additional rate hikes in upcoming months. However, he cautioned that above-trend growth risks delaying inflation’s downward trend towards target, which could warrant a more hawkish bias at the Fed. Resilient U.S. economic growth has also led some economists to argue whether the neutral rate—the policy rate that neither stimulates nor restrains the economy— could be higher than the Fed’s ~2% estimate. However, Powell reiterated that neutral rate estimates are subject to considerable uncertainty.

Meanwhile, ECB President Lagarde restrained from laying a clear path on whether the central bank could pause or lift interest rates for the 10th straight time in September. ECB policymakers will closely monitor the latest eurozone inflation data as some appear to favour further rate hikes in the face of persistently high inflation despite a weakening economic outlook. RBC Global Insights

Fitch Downgrades U.S.

On Aug. 1, Fitch Ratings cut the United States to a AA+ rating from AAA. This follows a similar move by S&P in 2011 and leaves Moody’s as the only major rating agency to still classify the U.S. as AAA. Fitch ascribed its decision to a combination of macroeconomic factors and governance issues. It highlighted the current debt burden—which it attributed to a combination of tax cuts and spending initiatives— and projections on future increases in debt levels driven by rising interest rates, an aging population, and higher healthcare spending. On the governance front, Fitch’s comments focused on debt-limit showdowns that are only resolved at the last minute. Read More

China, as the world’s second largest economy and populace, has a significant impact on global growth. Earlier this year, there was optimism that China’s post-pandemic reopening would bolster global growth, especially when other economies were bracing for deceleration due to rising interest rates. But reality unfolded differently. The initial rebound in manufacturing, exports, industrial, and consumer activity began to fade after the first quarter of the year and has since been uninspiring. There are several longer-term issues facing China: demographics, geopolitical strains, policy uncertainty, and the retreat from globalization. Read our firm’s article: China’s Next Act in a Changing Economic Order to learn more.

The costs of aging aren't often top of mind. When faced with situations where a loved one needs care or you yourself need some assistance, the magnitude of these costs can be surprising. Read our firm’s article: Five Health Care Costs to Consider in your Financial and Retirement Plans to better prepare for retirement and the uncertainties of aging.

~Shawn Milligan | Senior Wealth Advisor | The Milligan Private Wealth Management Team | RBCDS     

               

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