AGF Management (AGF) Status Update summary

Recent market performance and volatility

• Markets experienced a sharp drawdown of 6%-10% in early August, followed by a full recovery as recession fears faded and economic data improved slightly.

• Volatility was driven by Fed policy signals, weak job and manufacturing reports, and the unwinding of yen carry trades.

• Retail sales and unemployment claims data were better than expected, supporting a soft landing narrative.

• Market volatility is expected to persist due to ongoing uncertainty and upcoming economic data releases.

U.S. political landscape and election implications

• Kamala Harris has gained significant momentum in polls, especially among young people and African Americans, while Trump faces criticism for his rhetoric.

• Markets view a Harris win with a split Congress as an acceptable scenario, limiting the likelihood of radical policy changes.

• A close or contested election outcome could create significant market volatility and uncertainty.

• Key battleground states and a small number of voters will likely determine the election outcome.

Economic outlook and Fed policy

• Economic data is softening, with evidence of weaker job growth, declining discretionary spending, and rising credit card delinquencies.

• The Fed faces pressure to cut rates, with markets anticipating a 25-50 basis point cut in September.

• Aggressive rate cuts could initially spook equity markets but may support a rotation to value and small caps if they stabilize the economy.

• Global central banks are also moving toward easing, with the ECB, Bank of England, and Bank of Canada signaling or implementing cuts.