Market Observations
Well, another week, another demonstration that financial markets have developed an extraordinary ability to ignore trouble. Wall Street keeps climbing, bond markets are flashing warnings, and investors seem determined to enjoy the party before somebody switches off the music.
In this edition: France’s current mess? SARIM called it in June 2024. The USD strength isn’t about America. How long can the K economy run?
In this edition: IMF: growth up, risks down(side). Cold shower on the AI hype. Retail sales: it’s all in the gas pump. China, many dynamics, one machine, the Party’s will. A fair euro in a tough period
The chickens are coming home to roost. After months of investors throwing money at anything mentioning artificial intelligence, Wall Street has rediscovered an inconvenient truth: profits matter, and borrowed money isn’t free.
In this edition: IMF: growth up, risks down(side). Cold shower on the AI hype. Retail sales: it’s all in the gas pump. China, many dynamics, one machine, the Party’s will. A fair euro in a tough period
The chickens are coming home to roost. After months of investors throwing money at anything mentioning artificial intelligence, Wall Street has rediscovered an inconvenient truth: profits matter, and borrowed money isn’t free.
The UK is not about to go bankrupt. It borrows in its own currency, operates a floating exchange rate and possesses an independent central bank. But that does not make its debt position comfortable. Britain’s danger is not that it runs out of pounds; it is that investors demand an increasingly painful price for lending those pounds.
Well, another week, another demonstration that financial markets have developed an extraordinary ability to ignore trouble. Wall Street keeps climbing, bond markets are flashing warnings, and investors seem determined to enjoy the party before somebody switches off the music.
The odds of a hike of at least 25 basis points in October now stand at 20.5%, down from roughly 51% a week ago, while markets price an 84.5% chance of a hike at the December meeting. On several occasions we have questioned whether a genuine tightening cycle is beginning, arguing instead for a cosmetic, data-dependent hike in September.
The World Is Going Crazy – So Let’s Zoom Out. If the last ten years have taught us anything, it’s that markets can absorb an astonishing amount of nonsense. Brexit, Trump, Covid, lockdowns, zero interest rates, inflation, wars, energy shocks and the fastest monetary tightening cycle in decades – yet the S&P 500 has marched relentlessly higher.