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- July proved to be another stormy month for the US, as Fannie Mae and Freddie Mac, the government sponsored mortgage giants which either own or guarantee around half of America's outstanding mortgages were forced to raise capital.
- Meanwhile, Ben Bernanke, Chairman of the Federal Reserve (Fed) announced that "inflation seems likely to move temporarily higher in the near term". This proved to be the case as inflation in the US rose by 1.1% in June, leaving it 5% higher than a year earlier. This was the first time that the headline rate had reached 5% since 1991. The core measure, which excludes food and energy prices, rose by 0.3% in June, to be 2.4% higher than a year earlier.
- The month also saw the government announce that the US economy had grown at a slower than expected rate in the second quarter of 2008, while it retrospectively revised the numbers for the last three months of 2007 to show a contraction, the first such backward slide since the last recession in 2001.
- Hopes that the US housing market had stabilised proved unfounded as existing home sales fell once more while retail sales stalled in June, following three consecutive monthly increases.
- The US equity market as measured by the S&P 500 Index lost almost 1.8%, while the FTSE AW North America Index, which includes Canada, lost slightly over 2% in local currency terms. The oil and gas sector was hardest hit as oil prices dropped from their early July peak, with Exxon Mobil, Chevron and ConocoPhillips all suffering. By contrast, the financial sector held up reasonably well with Bank of America and JPMorgan Chase both recovering some lost ground.
- With the exception of very long-dated securities, US bond returns were positive. Credit underperformed government bonds, with financials underperforming the sector; although deleveraging amongst the banks continued, headlines exposing the shortcomings of Fannie Mae and Freddie Mac and continuing write downs in the sector conspired to force credit spreads wider. Inflation-linked bonds underperformed conventional bonds as concern over inflation expectations subsided.
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