BREATHER: We see cooler returns as Q3 starts. As markets digest big gains and prep for a strong finish to the year. Summer seasonality is weaker, volatility low, and the growth slowdown to come. We are positive as fundamentals turn ‘less-bad’ and sentiment remains cautious. The path of least resistance is up, and any weakness should be bought. July tests are rally validation from Q2 earnings and a possible final Fed rate hike, with half an eye on potential wild cards from commodities and Japan. We focus on long duration and defensive growth assets from tech to healthcare to bonds and crypto, and clear of ‘value-trap’ cyclicals, small caps, commodities.
JUNE: S&P 500 had a big month, posting a third its YTD return, with tech-heavy NASDAQ-100 continuing to lead broader US gains and Japan’s Nikkei 225 leading globally. The macro was largely supportive, with growth cooling but resilient and headline inflation falling. The US debt ceiling deal was a relief. But central banks postponed the rate cycle end, led by UK, Canada, and Australia, with core prices sticky. Bearish investor showed signs of cracking, chasing stocks up. Crypto shrugged off SEC’s accelerating crackdown. Stock highlights saw Apple’s AR/VR launch, reopening IPO markets as CAVA soared, and surging BEACH summer travel stocks.
JULY: The highlights and wilds cards are: 1) equity rally validation from a better-than-feared Q2 earnings season, starting 14th. 2) Continued lower US inflation (12th) supporting a final Fed rate hike (26th). 3) Alongside further GDP resilience from China (15th) to US (27th) and the consumer, with Amazon Prime Day on 11th, containing market recession fears. Whilst possible ‘wild cards’ are a 1) breakdown of the Black Sea Grain Initiative (18th) that would spur further ag commodity gains. 2) Spain’s snap election (23rd) doubly in focus as it also holds the EU Council Presidency. 3) Any YCC rate change at Japan’s BoJ meeting (28th), that could be felt around the world.
All data, figures & charts are valid as of 29/06/2023.