The pace of US CPI inflation moderated slightly, but it’s too early for the market to conclude rate hikes are over. There are many imbalances still to resolve – especially in consumer credit. Meanwhile, the new UK premier’s clumsy attempts to blame the BOE raise questions.
Chips are a critical component of global supply chains – there are significant geopolitical risks inherent in the concentration of semi-conductor production in Taiwan. However, an even bigger geopolitical risk may have been triggered by the FBI raiding Trump’s lair in Mar-a-Lago.
So many contradictions abound in current markets, but it’s possible to cut through the noise to discern some probable direction. The old adage of being confident while others are fearful looks one way to approach the current confusion.
Biden’s Tax and Climate Bill is the closest thing to a grown-up energy transition plan we’ve seen in the West. There is a significant risk ESG fundamentalism trips up efforts to reach carbon neutrality – but there are signs pragmatism will win out.
BP will use some of its windfall Ukraine Oil Spike profits to fund a stock buy-back. Stock buy-backs are appropriate is some limited circumstances, but generally they distort the way capitalism is supposed to work, undermining good companies and sound corporate governance.
There are lots of outlooks and scenarios on the inflation threat: what if its longer and turns stagflationary, and just how much more destabilising would the fraxious global economy become?
In bonds there is truth: Apple’s Jumbo $5.5 bln corporate bond deal hints of a firmer market to come. A clear divide between US Recovery and European Slowdown is increasingly apparent – a weaker Euro will further add to European problems.
Not an insightful Porridge this morning, but let me tell you a story about lessons learnt on holiday and what’s likely to dominate the news flow in August ahead of the September market!
Politics matter in markets – and despite a new Premier, the UK will likely remain far from fixed and a long way from political stablity. The problem is finding a pragmatic approach to Brexit.
Despite US inflation hitting a 40 year high, US growth stocks rallied – reflecting the belief inflation and recession will be short and sharp. It’s a fair bet – but go back into growth stocks eyes-wide-open, and don’t be fooled by the most dangerous myth surrounding Tech – Personalities!
