Investors weighed U.S.-China relations and Fed messaging about interest rate increases.
In economic data, investors this week are awaiting mortgage demand numbers and PMI data out Wednesday.Leuthold Group chief investment strategist Jim Paulsen said that despite the Federal Reserve's"ongoing lip service toward fighting inflation" by tightening monetary policy, there are several factors that suggest the market may be entering an"emerging easing cycle."
Bond yields have have achieved a sizable rate cut, the dollar is finally rolling over and junk spreads have pulled back, he said in a note to investors late Tuesday. Plus, monetary and fiscal growth is likely to also soon become more accommodative, as Fed chair Jerome Powell hinted at in comments last week.
"The media, policy officials, and investors focus primarily on the war against inflation and how aggressively the Fed will need to keep hiking rates," he said."Yet, with real economic growth already reduced to a crawl and evidence building that inflation is easing, the case for further Fed tightening at its September meeting is rapidly falling apart."
"Investors should place appropriate weight on the leading nature of economic policies," he added."Tightening today means lower real and nominal growth tomorrow."
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