Independence and decline –

The United States will be closed on Monday for Independence Day. Maybe it gives you good support, but obviously when “they” are gone, the atmosphere is different, the volumes are much less dense, and the atmosphere is much more hesitant, knowing that you never know what they’re going to do to us when they come back from a long weekend barbecue. At the moment, based on my readings over the past two days, we seem to be very torn between the fear of a recession and the belief that the bottom of the hole is somewhere ahead. It remains only to find exactly where and, above all: WHEN?

Audio recording from July 4, 2022

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Thoughts, theories and more

The week ahead will be difficult, but probably calmer than the next. Of course, we’re still obsessed with inflation numbers and how the Fed might interpret them. And so we’re also still very concerned that depending on what the Fed does, we can worry about a recession that raising rates too much could lead us into. Or not.

Frankly, lately everyone has their own theories, everyone collects their own statistics to “see what happened in the past, at similar times”, re-reading for the thousandth time the caveats of basic research reports that tirelessly repeat that “past performance does not guarantee future performance productivity, and the water gets wet.”

where are we

So now we’re in the middle of nowhere, resigned to listening to the biggest stars in finance come in to tell us EXACTLY what’s going to happen in the coming months. We can only swoon with admiration at the sheer number of beliefs these demigods of finance proclaim, but when we take the time to review what they tell us week after week, we realize that they don’t know more than we do, but that they simply have access to to a “media platform” slightly more efficient than ours.

If you’ve taken the time to read two or three newspapers in the past few hours, you’ve probably realized that we regularly find new prose by Nouriel Roubini telling us about his end of the world. The end of the world is experiencing a 50% correction in the S&P500. Thus, his target is 1900 according to the American index. It can be scary. Especially since at the same time we had Michael Berry, who is far less bullish than Roubini, as the latter still sees “another 20% drop in the S&P500, which is halfway to a bear market” – according to the guy who had “saw the approach of the mortgage lending crisis”.

They must be right

When you see these two prominent figures in the Wall Street universe, you may feel an icy current running down your spine and you’ll want to short the market, buy a put, and chart a kilo of gold bullion just to stay rich anyway case.

Yes, because Rubini and Berry must be right. Given the relevant resumes. Yes, they must be right, but however, it would be good to remember that they were REALLY right in 2008 and for 14 years if we were to count the number of “predictions” these two got completely wrong. done, I would need at least a 20-page chronicle so as not to forget anything. So before I cry wolf and roll around on the floor because “Rubini said this” or “Berry thinks so”, I’ll wait a bit. Knowing that we are always smarter AFTER. We will see what the future holds for us, and we will not react to the “vision” of certain stars who were only once in their lives and since then have lived a little on their achievements.

Look ahead

And as we look at what lies ahead in the next few days and hours, we tell ourselves that it would be good to take Monday off, do some meditation and yoga, and wait until we have a little more concrete to get our teeth into. What we know TODAY is that the Fed is waiting to see if inflation slows down. If inflation stalls, investors will act twice as fast as the Fed and expect Powell “may not raise rates by 0.75% in July.” MAY BE. But you’ll need a sign for that. At least one.

For now, we’ll focus on the US jobs data that will be released on Friday. Suffice it to say that during the week we have enough time to get some fresh air. Knowing that several central bankers will be speaking and depending on their speeches, anything can happen. Not to mention that the ECB will publish the minutes of its last meeting. A read that we will devour in the hope that it will change our lives. It will be Thursday. In the meantime, I can guarantee you that we will continue to discuss every possible theory about inflation, recession and rate hikes, and depending on how it is presented, anything can happen.

Monday, which begins under the sign of distrust

The US morning financial literature is definitely in “bear territory” this holiday Monday. We feel that anxiety is gripping us by the throat and that the indications that we see, that we hear, and the predictions that are made here and there, all clearly indicate that we are going straight ahead, in the direction of the wall of recession, and apparently the brakes no longer work. And I don’t know if you’ve ever hit your forehead against a wall – even at 30 an hour – it’s only mildly enjoyable.

Futures fell 0.8% early this morning. It means absolutely nothing because there are no Americans there (yes, I know I’ve been saying this for the last time) and it means very little. But today, a 0.8% decline in futures, Americans present or not, is never a good way to start the day for anyone with even a modicum of optimism. And then, as Americans sip beer and cook burgers, wondering if the Supreme Court is totally dumb or just a little bit (well, for those who can count to 100 and have a passport), you might as well look at the European index charts. We can do it. We don’t necessarily want it – in fact it almost scares us – but we feel that Europe is back at its lowest point, and if for one reason or another we lower those levels, I’m afraid we’ll start to think – here and there – that the bottom of the cup, well, it is not here and it is much lower.

Moreover, while we’re focused on the US, which is closed, and the Europeans, which are on the brink, let’s still keep an eye on SMI. The chart is a little less ugly than the DAX (just a little), but we’ll have a CPI release on our mounts today as the sun announces a brilliant awakening. And I’m willing to bet we’ll have another talk about what the SNB “might” do in the event of a bad surprise. In the case of a good one, by the way.

In Asia

This morning in Asia we are asking ourselves the same questions I just told you above. The clues are mixed and there isn’t much direction at this point. Oil is at $108, gold at $1,812, and Bitcoin at $19,000. Also, in any case, be careful because there is a “I don’t-know-who” who announced last week that Bitcoin has become the new leading indicator for the world’s stock markets and that when Bitcoin goes down one day, the stock market goes down the next . . In short, when you see the colors of the market and the atmosphere that dominates the futures, I think I would be inclined to say that Monday will be a holiday for me as well.

In the news of the day, we note the not too encouraging comments of Mark Zuckerberg regarding the economy and the state of his inbox. It is clear that for some time the CEOs of large companies have all had their say. After Musk predicted a recession, we see Zuckerberg getting into it and Bezos going after Biden over inflation. Zuckerberg has encouraged those who no longer want to work for him to leave, that it is not a problem for him and that the future will not be easy as Facebook/Meta is going through one of the most difficult periods in its history. We also note that Tesla released its sales for the last quarter and that they were down 18% due to a shortage of certain parts – blah blah blah – we know the story. Musk did “retweet” but not about Tesla sales, he just tweeted a photo of himself and his 4 kids with their dad. His box registers a drop in sales, and the boy goes to the pope… Is it a coincidence or just desperation?

Numbers of the day

For today’s numbers, we’ll have Germany’s trade balance, Europe’s PPI and a couple of ECB guys talking. At the moment, futures are down 0.7%, and still the atmosphere looks moderately euphoric.

To the rest of you, I wish you a great start to the week and see you tomorrow!

Thomas Veillet

“Don’t let making a living stop you from making a living. – John Wooden