OUTLOOK: A strong finish narrowed August’s stock loss to c.2%, with the dollar stronger, oil flat, and bonds and bitcoin lower. This resilience is telling after August’s triple whammy of higher fixed income yields, oil prices, and China concerns, after a record-breaking first seven-month rally. Some of September’s weak seasonality fear may have been anticipated, and we remain positive markets. With inflation falling and interest rates now peaking, earnings troughed and valuations supported. We focus on long duration and defensive growth, from tech and bonds to crypto. And are cautious value-trap cyclicals, small caps, commodities with a slowdown coming.
AUGUST: Saw triple-hit of 1) higher bond yields after Fitch’s US AAA downgrade and Treasury’ $1 trillion issuance plan. 2) $85 oil as Saudi extended its voluntary 1mbpd supply cut. 3) China debt and growth concerns as deflation built and interest rates cut. Europe led flash G4 PMIs into recession after six months of growth. Q2 earnings saw S&P 500 profits fall to a -3% trough, with 80% stocks and all sectors beating forecasts. Stoxx 600 profits fell 5%. ‘Magnificent seven’ leader NVDA again trounced high sales expectations, by 30%. But investors punished misses hard from ADYEN to M. Banks hit by ratings cuts, new capital rules, and Italy’ windfall tax.
SEPTEMBER: Inflation remains the most important number in markets, and easing pressures alongside rising growth risks set to keep Fed, and more surprisingly the ECB, on hold at Sept. meets, with BoE the hiking outlier. Event risk is high with building El Nino and peak hurricane season keeping commodities on their toes; latest US government budget brinkmanship a bond market focus; and drip-feed of stimulus in world’s no.2 economy, China, a global concern. The corporate highlight is AAPL’s key iPhone 15 launch and coming ARM, Birkenstock, and Instacart tests for recovering IPO market, ahead of the October 13th’s third quarter earnings season start.
All data, figures & charts are valid as of 31/08/2023.