This first day of the semester has been a bit messy. We’re back from the weekend, we’re starting the second half of 2024 and we’re struggling a bit to find where our priorities are: lower rates, macroeconomic figures related to employment, central bankers who are going to speak, politicians who are all in “free-style” mode on both sides of the Atlantic, a new revolution on Tesla that is coming or the fact that quarterly expectations are a bit high. But no matter, it’s still just speculation and then after all, the only concrete figure that came out was mediocre, but the Nasdaq is still at its all-time high for the first day of the rest of the year.
Audio of July 2, 2024
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ISM pas terrible
Before digging a little deeper and remembering that for the first day of the second half of 2024, all the main indices were up, that the S&P500 was up 0.27%, that the Nasdaq Composite was up 0.83%. That it ended the session at a new all-time high – the 21st of the year, unless I’m mistaken. That the US 10-year yield hit 4.45%, breaking the 50-day moving average upwards. But it was still necessary to remember that the US ISM Manufacturing index came out below expectations at 48.5 against 49.2 expected and 48.7 the previous month. This is also the third consecutive month where the figure has been below 50, indicating – if there was still any doubt – that the economy was taking a hit.
This is probably why the indices ended up, since we have understood – and this for weeks – that any bad news for the economy, employment, or the reproduction of camels in the Middle East would be considered EXCELLENT NEWS because it will FORCEDLY push the FED to lower rates once and for all!!! So everything is fine as long as it is going badly. The market continues to be in the same mood; namely that the more the news shows us that things are not going well, the more we buy because we are betting on the rate cut that is becoming clearer. It should be noted that at the moment, the markets are “betting” on a cut in November and for me, as far as I am concerned, the more we go up on the principle of a “rate cut to come”, the more I become convinced that we are going to get a (slap in the face) the day rates REALLY go down!
Solid tech
In any case, during yesterday’s session we were treated to a remake of the first part of the year, since it was the Magnificent Seven that took control of the rise. Apple was up 2.9%, Microsoft 2.19% and ended at its all-time high. We have known Nvidia in better shape, but the king of AI was still up 0.62%, while Google gained 0.58%. Amazon and Meta rose 2.04% and 0.08% respectively and the undisputed STAR of the day was Tesla which exploded 6.05%.
The electric car manufacturer was crazy for several reasons. First of all because we allow ourselves to think that today the company will publish its sales for the half-year and that since everyone has revised their expectations downwards, it could well be less bad than expected and also because these last two days, we have several analysts (and not the least, since Dan Ives is one of them) who have come to get excited about Tesla estimating that if the first part of the year will have been that of Nvidia, the second will be that of Tesla. We expect (OF COURSE) rotten figures for the quarter, sales are in free fall and used Teslas are no longer worth anything on the market, but analysts already have their eyes fixed on August, since Musk should present his ROBOTAXI which will change our lives. He’s been messing with us for 5 years now, but apparently this time it’s for sure, it’s going to happen and it’s going to be the same revolution as when Steve Jobs introduced the first iPhone – at that moment we didn’t know that we’d spend 30% more of our time on the toilet just to be able to “scroll down” a little longer. Well, ROBOTAXIS will be the same. Except we won’t be able to take them with us to the toilet. Anyway, last night the Magnificent Seven did their Magnificent job of taking the Nasdaq Composite to its all-time high.
Politics at the center of the game
On this Monday, July 1st, politics were at the center of attention. First of all, we continue to talk about Joe Biden who continues to do whatever he wants – for those who don’t know what I’m talking about, type “Joe Biden Elton John” on Youtube and by watching the video to the end, you will see that once again, the American President is off the mark and the mere idea of knowing that this guy has access to the nuclear codes is chilling. Calls for Biden to drop out of the re-election race are growing in number, but they also come up against the question of “who to replace him”. Logic would dictate that it should be Kamala Harris, but everyone knows that she is useless and that if we replace her with the governor of California, we will alienate the black electorate and that of women. The equation is therefore insoluble, all that remains is to find the right chemical mixture to make POTUS work for another 4 years with injections. By the way, Biden said this weekend that he only knows how to do one thing: “tell the truth.” During last Thursday’s debate, he said that the American debt had exploded during Donald Trump’s term and Biden’s management was better. That’s true. Except that during his term, Trump increased the debt by $6.5 trillion and that right now, with Biden still having 5 months to go, he is at $7.9 trillion of debt increase and at the rate he is dipping into the cash register, the hole is going to get even bigger.
Another country, another policy. Yesterday was also the time of the rebound in France. Or should I say: “the time of redemption”. After counting Sunday’s votes and after having marked all the constituencies, the market came to the conclusion that Jordan Bardella would not have the absolute majority next Sunday. Which should make the country ungovernable, but which, at the same time, would prevent the extreme right and the left from implementing their destructive program for the economy. Especially that of the left. If you spent a little time on “X” yesterday, you must have been able to witness the ire of the left-wing accounts who were screaming scandal because the CAC was rebounding following the victory of the RN on Sunday. We were beyond anger, it was fury. They all improvised themselves as experts in finance and rushed to come and give their opinion and vomit on big capital. But in reality, what we must remember is that the market “hopes” that Bardella will not have an absolute majority and that the situation will be “less bad”.
CAC volatility is not over
One thing is for sure, we haven’t finished laughing on the French market. The Paris index will have had a great day in terms of volatility and this kind of day could even happen again depending on the waltz of withdrawals or candidates who REFUSE to withdraw in order to “block the RN”. At the height of the day, the CAC was up 3%, to end with only a 1% increase and change. This Monday’s session was therefore a tribute to Claude François, since it comes and goes, it’s like a Popular Front. The best performances of the day are to be credited to the banks who were finding a taste for life again, just like all the companies that are threatened with privatization in the event of an absolute victory of the RN. Which lets you imagine what could happen next Monday if Marine Le Pen’s party wins 290 seats in the National Assembly. I therefore recommend the “heads or tails” strategy. Heads, the RN wins the RTL suitcase and the market gets wrecked and tails, we end up with an ungovernable France with antinomic Macronie-left alliances to oppose the hard right, but suddenly, nothing changes, it’s less bad and the market goes up.
This morning in Asia, it’s relatively calm. The justifications are always the same: we’re waiting to learn more about rates and, what’s more, Powell is going to speak at an event organized by the ECB. Needless to say, no one wants to do anything. Japan and Hong Kong are up 0.6% and China is doing nothing. Oil is soaring a little more and is currently trading at $83.54. The reasons for the increase in the price of a barrel are justified by the tensions between Israel, Lebanon and Hamas. But also because the “hurricane season” is starting in the Gulf of Mexico and there is less and less drilling in the US – which could lead to a less plentiful supply. Which will surely help on the inflation side. At the moment, gold is still paralyzed around $2,335 and Bitcoin is worth $63,000 while Tom Lee thinks it is on the verge of breaking everything to the upside and going to $150,000 by the end of the year and the arrival of Trump in power.
Figures and expectations
For the rest, we are in a bit of a wait-and-see mode. We will see what Powell will tell us, what Lagarde will tell us and what inflation in Europe will give. But given the figures from France last Friday and from Germany yesterday, I would bet on a CPI at 2.4% and a Core CPI at 2.7% – 0.1% below expectations. As planned in the program. This afternoon we will start to project ourselves into the future and into the theme of the upcoming RATE CUT, since the JOLTS will be out. A figure that will give us an idea of the state of employment in the US. And this will only be the first of many.
We will not forget to remember that tomorrow the American market will only be open in half-session on the eve of the national holiday, the volumes of the next few days should therefore be strongly affected. And then, I know that this is not the time to talk about inflation since the subject of the week is employment, but we will still note that at the moment, even if Cocoa has really crashed, it should still be noted that the price of chicken is up 67% since January 1st, while beef and pork are up 15%. Finally, the only thing that is not going up “too much” is bacon, which is only going up 7% in 2024. Meanwhile, the price of fast food has gone up 30% in 4 years. Basically, access to food is becoming more and more complicated in the USA, so that’s good; inflation is under control… But the problem could come from elsewhere…
For the moment, futures are down 0.22% and we are waiting for Tesla sales figures (normally)… Have a great day at the start of autumn and we’ll see you tomorrow to take stock!
Thomas Veillet
Investir.ch
“There are old traders and there are bold traders, but there are very few old, bold traders.” Ed Seykota
