Last Monday we started the week saying that between the GDP and the PCE, there is a good chance that everything was going to change and that we were going to go home Friday evening with a very precise date on the next rate cut. and certain clarifications on the positioning of the FED for the next six months. So you, I don’t know, but I don’t know any more than before and I have the impression that the central bankers who gave their opinions have clearly demonstrated that they are stealing on sight and that it It didn’t take much to make them change their minds, but that this “not much” hadn’t happened yet.
Audio of July 1, 2024
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The week is going to be spectacular (or not)
That’s good because given what we’re expecting this week, we have the impression that here again: anything can happen and that, if it does, we’ll come home with FINALLY clear answers. I warn you that you won’t have to base all your hopes on that either, because fundamentally, we’ve been around for a while now with these stories of rate cuts and that, for moment, we still haven’t seen anything coming (even if recently, we still had the impression that we were closer to a decline than an increase).
So, after a week based on the state of health of the economy and the consumer, all sprinkled with a dose of PCE which showed us that inflation was (it seems) finally starting to pick up again. its race towards 2% – although this still remains very conditional, since we must also not forget that the inflation figures are those for the month of May and that in May, the Gasoline and oil were not really at the level they are on this Monday morning. But no matter, I said that after a week focused on macro and inflation, this week we are going to focus on employment! Yes, the number of Jobs created, the number of positions available to be filled and the number of unemployment benefit requests requested over the last 7 days. Based on this, some of us expect to find answers that will allow us to get inside Powell’s head to know when he will cut rates and how many times.
We can dream
Good luck. For those who imagine that Friday’s figures will definitively give us the answer we are waiting for, I would like to point out that generally the figures for Non Farm Payrolls that are published on the first Friday of each month are often rigged, manipulated and poorly calculated and that we now ALL know that starting next month, they will be revised downwards or upwards, depending on how it suits us. But anyway, no matter, this Monday morning we still have our eyes glued and we still want to believe that we will have answers.
In any case, the employment problem can also demonstrate that the economy is deteriorating rapidly and that, observing this state of affairs, the FED will rush to lower rates before the economy falls into decline. recession. It’s a plan that is being mentioned more and more, since we must recognize that if the Democrats still want to have the slightest chance of keeping the White House, we will have to avoid seeing the economy collapse within 8 weeks. future. There is also something that we will have to watch out for, which is the fact that at the end of the half-year, we saw quite a few “force sales” on certain technological stocks linked to AI – and if that were to be confirmed in the coming days, this could pose a problem, not to mention that at the end of the week, we also noted an increase in the volume of purchases of protective puts on the S&P500. So yes, the week can provide us with answers, but it can also have unpleasant downward surprises in store for us.
RN
On the French side, we continue our political soap opera. You have all seen it, the RN has once again scored significantly in the first round of Macron’s legislative elections. Not enough to obtain a clear majority in parliament, but enough to cause a huge mess in the French political landscape. Yesterday, the left, like Macron’s right, were in “PANIC” mode, for fear that Bardella could secure the seats he lacks to have a total majority in the National Assembly. We heard it all last night, but what we must especially remember is the calls to BLOCK THE FAR RIGHT. Once again, those who follow French politics must remember having already heard this kind of speech.
As in every election in France, in the second round, France will no longer vote for a party, for a project or even for a philosophy, it will vote AGAINST a party. There is no longer a single thought on what must be done to make the country function, everyone is calling to block Bardella and we will then see how to steer a drunken boat with guys like Mélenchon and Attal who will have to find a way to govern together. As for the reaction of the markets, we will see that later, but one thing is certain, it is that the CAC40 has no room for error, if the index takes the risk of go for a walk below 7,400 points, we will have to hang on and instead of calling for withdrawal and suddenly finding the far left hyper-attractive, we will also have to think about reassuring investors and listed companies to the CAC40 which still keeps France running – unlike politicians who no longer serve much purpose because they are so pathetic… We will be given the answer in a few hours.
China in the tough
This morning in Asia, Chinese PMIs came out below expectations and North Korea is still having fun firing missiles for training. Despite everything, after a lower opening, most of the region’s indices returned to the green, but in a more than homeopathic way. The Nikkei is up 0.21%, the Hang Seng is up 0.01% and China is up 0.31% – it’s really becoming more and more difficult to interpret an economic figure, I’m on the verge of hiring an Artificial Intelligence to do it. On the oil side, WTI is once again close to $82 and gold is at $2,335. Bitcoin seems to want to start rising again and is trading at $63,500 – if it manages to rise to $64,000, we will again talk about an upward break of its descending wedge – which technically, could open up the possibility for it. sets new altitude records.
In today’s news, we mainly talk about politics. The whole world has an opinion on what is happening in France and there are even rumors that the ECB could intervene in the bond markets in the event of a panic on the OAT. Still on the political side, but this time across the Atlantic, Joe Biden confirmed his intention NOT TO WITHDRAW from the race for the White House, because that’s good, he is no longer senile and is no longer victim of dementia. He ate a balanced diet this weekend and he’s feeling much better. He even received the support of Obama who praised the President to reassure the people. Clinton got into it too. Besides, we can’t say that things are going very well, because 72% of Americans think that Biden will be incapable of completing his second term.
Suite
In any case, the excuses to justify Joe Biden’s condition are so pathetic that one can really wonder who still wants to believe them. Otherwise, to return to the wonderful world of investment, we remember that one of the most cautious investment banks on the markets was JP Morgan. I say it was, because this weekend BCA Research announced that their new target on the S&P500 was 3,750. BCA’s strategist believes that the country is heading towards recession at full speed and that the correction could be 30% quite quickly.
Meanwhile, Boeing is still in deep shit with a lawsuit hanging over their heads for the crash of the two 737 Max for which they allegedly did not compensate the families properly. However, the market does not seem to care. And then, to distract the media, Boeing also announced its intention to buy Spirit Aerosystems – one of their suppliers – Spirit was worth 3.83 billion on Friday night and this morning, it could be worth 500 million more. And then, it should be noted that the United States has been the subject of quite violent criticism from the IMF. In its annual assessment, the IMF praised the “remarkable performance” of the world’s largest economy and expects growth to continue. But on the other hand, according to them, some problems are becoming too serious to ignore: The budget deficit is too large, which is creating a sustained upward trajectory for the public debt/GDP ratio (no kidding???) and then, we’re talking about bank failures again, since the IMF thinks that the sector presents significant risks of deterioration. Not to mention that the projections predict a debt of 57,000 billion within ten years. In short, the IMF thinks that it is time for the US to stop doing whatever it wants and start thinking about bailing out before the ship is really sinking. Not sure that the US gives a damn – in the IMF’s opinion – but that’s one more person who thinks that by doing whatever it wants, the US will become just anybody…
Numbers side
As for today’s figures, we will have quite a few PMI’s in Europe, including France, Germany and Spain. Germany will announce its inflation figures (CPI) and then we will have Construction Spending in the USA, as well as ISM Manufacturing.
It should also be noted that this week, in addition to a lot of figures concerning employment, we will also have Powell and Lagarde who will speak and the Minutes of the FOMC Meeting on Wednesday evening, without forgetting that on Thursday the US markets will be closed for the National Holiday. For the moment, futures are up 0.25% and the US seems confident while Europe is still in instability and that it will last a little longer.
Have a great day, a great start to the week, a fantastic start to the term and semester, as far as I’m concerned, I’ll see you tomorrow, as usual!
Be strong !
Thomas Veillet
Investir.ch
“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1.” Warren Buffett
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