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As investors' concerns about a U.S. recession eased further, U.S. stocks had their best weekly performance of the year last week and successfully recovered the losses at the beginning of the month.

Now, investors are focusing on the Jackson Hole Global Central Bank Symposium next week. How the Federal Reserve will release signals will become the focus, and the impact on risk appetite may become a catalyst for further market upside.

U.S. economic data signals

Similar to the previous period, the major economic data released in the past week all showed that the July non-farm payrolls may be just an abnormal indicator.CPI) increased by 2.9% year-on-year, returning to below 3% again after three years, while the core CPI excluding the more volatile food and energy components rose by 3.2%, the smallest increase since April 2021.

In addition, US retail sales grew 1% in July, far exceeding expectations and hitting a nearly one-and-a-half-year high. The recovery of consumer demand is crucial for the US economy to achieve a soft landing. The job market also showed signs of recovery, with 227,000 initial jobless claims last week, lower than the expected 235,000 and the previous value of 233,000. This may further reinforce the view that the July non-farm report may indeed be negatively affected by Hurricane Beryl and that the labor market will continue to remain resilient.

Bob Schwartz, senior economist at Oxford Economics, said in an interview with Yicai Global that the overall and core CPI growth were basically consistent with forecasts, but rental stickiness needs to remain vigilant. At the same time, the recovery of the monthly retail rate is related to the fading impact of the cyberattack on auto sales in June. He believes that strong household balance sheets and resilient employment growth will enable consumer spending to grow at a rate of about 2% for the rest of the year, thus ensuring a steady economic expansion.

As expectations for a soft landing of the economy increase, U.S. Treasury yields fluctuated in a narrow range. The 2-year Treasury yield rose 1 basis point to 4.06% this week, while the benchmark 10-year Treasury yield fell 5.1 basis points to 3.89%, still at a low for the year. Federal funds rate futures show that the market expects the probability of a 25 basis point rate cut in September to be more than 50%, making it the most popular option.

Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, said: "We think that economic growth is slowing, inflation is also weakening, and the Fed will start to cut interest rates, but there will be no panic situation. We will see two or three rate cuts, most likely two rather than three, unless the unemployment rate continues to rise."

Investors will then turn their attention to the coming week when Fed Chairman Jerome Powell delivers a speech at Jackson Hole, where his views on recent data are expected to set the tone for the easing cycle that began in September. Chicago Fed President Goolsbee said last week that the U.S. economy showed no signs of overheating, so central bank officials should be wary of implementing restrictive policies for too long.

Schwartz told China Business News that judging from the current macroeconomic performance, the Fed's September rate cut is a foregone conclusion, and the traditional 25 basis points is more appropriate than 50 basis points, unless the US non-farm payrolls deviate again in September. As wage and employment growth gradually slows, real income growth is weakening, but it should maintain a sufficient pace to support spending and lay the foundation for the sustainability of expansion and a soft landing.

Can the market continue to rebound?

As of last Friday, the S&P 500 and Nasdaq had achieved seven consecutive daily gains, and the three major stock indexes also recovered their losses from the plunge two weeks ago.

The better-than-expected data calmed concerns about a sharp slowdown in the world's largest economy. "This week's batch of data suggests the sky is not falling as some investors had begun to fear," said Mike Reynolds, vice president of investment strategy at Glenmede Trust. "So far, all the data we've got ahead of (the next Fed meeting) makes a strong case for a rate cut."

As optimism about artificial intelligence resurfaces, technology companies generally rebound, and artificial intelligence trendsNvidiaThe cumulative increase in the past week was nearly 19%, the best performance since May last year.WalmartThe CEO's comments were seen as restoring confidence in the technology's usefulness. "When AI started to become the main narrative in the market, it was seen as a technology that would help companies simplify their operating systems and increase productivity," said Quencey Crosby, chief global strategist at brokerage firm LPL Financial. Crosby said that in recent quarters, developers of generative AI have struggled to express plans to monetize the technology, and Walmart offers hope in that regard.

according toBank of AmericaThe latest monthly institutional survey shows that despite the turmoil in global financial markets, investors' optimism about US technology giants and expectations for a soft landing for the economy have not diminished. The survey results show that respondents' expectations for a soft landing have risen to 76% from 68% in July.

Some funds have begun to flow back. Scott Rubner, managing director of Goldman Sachs Group's global markets division, said that in the past month, the sales of systematic fund CTAs, which buy stocks based on market signals and volatility trends rather than fundamentals, reached the largest level in four years in terms of dollar amount. "But now the market has calmed down.Chicago Board Options ExchangeAs the volatility index VIX falls back below its long-term average, it is estimated that systematic funds will buy stocks at a scale of as much as $1 trillion.”

Charles SchwabIn its market outlook, it wrote that the main catalysts for last week's rebound included low inflation data and a strong retail sales report, both of which indicate a healthy economy. The report believes that perhaps the rise in unemployment has more to do with an increase in the labor supply rather than large-scale layoffs. Based on the stock market's rebound in the past two weeks, the market seems to be shifting from concerns about growth to the "soft landing" camp.

The agency believes that US stocks are expected to continue to rise in the coming week. Powell may convey a dovish tone at the Jackson Hole Central Bank Annual Meeting, which should be beneficial to bulls. On the other hand, the technical overbought continues in the short term, which may cause profit-taking in the index. In addition, geopolitical headline risks are still on investors' radar. Therefore, the trend may fluctuate slightly, but the Fed's interest rate cut signal is expected to be a sufficient reason to increase stock exposure.