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.
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!
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!
Inflation will dominate the headlines while the US earnings season kicks off. The prospects for stocks on the back of falling numbers and crashing consumer sentiment bode ill for recovery, and strongly suggest there is further market downside to come in Q3.
Don’t be distracted by the antics in Westminster – there is a major market shift going on between the End of the World being triggered by Inflation, or Recession destroying everything. Relax. European Energy policy will probably kill us!
Stocks tumbled 20% in H1, but Central Banks are fixated on Inflation as the No 1 priority with higher interest rates nailed on. Supply chain issues remain difficult, meaning corporate earnings will remain under pressure. The market is setting up for further weakness through H2.
Inflation is increasing the burden of the UK’s debt, but it’s been well managed and should not impact as heavily as it might in other highly indebted nations. We can probably afford to spend more – especially in Defence, the primary duty of any state.
As we start a new week of dismal markets, depressing political news, rising inflation and lots of what next worries… relax.. the Sun will come up tomorrow. Not so sure about the economy though…
The Fed just aggressively hiked 75 bp in the midst of the first major correction since 2009, making clear the game has changed, and we’re into a whole new cycle. While the market correction remains ongoing, when it flips, it will flip swiftly. Already there are positive signals to be seen – but only if you look outside the box.
After the brutal lessons of April, May will set the tone for a new market – lots of threats, but full of opportunity.
