Comment of the Day
26th July 2023
Eoin Treacy
Jul 27
Video commentary for July 26th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Fed hikes by 0.25% and the market pauses, oil eases dollar weak, yields steady, no follow through on China's rebound yet, clearer evidence of changing consumer spending habits.
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Fed Raises Rates as Powell Keeps Options Open for Future Hikes
This article from Bloomberg may be of interest. Here is a section:
Officials will be looking for moderate growth, cooling inflation and supply and demand coming into better balance, particularly in the labor market, as they assess whether and when to raise rates again, Powell said.
“What our eyes are telling us is policy has not been restrictive enough for long enough to have its full desired effects,” he said. “We intend again to keep policy restrictive until we’re confident that inflation is coming down sustainably to our 2% target, and we’re prepared to further tighten if that is appropriate. And we think the process still probably has a long way to go.”
Eoin Treacy's view
The bond market continues to expect one more hike but nothing more than that. The fact the Fed’s own internal economists no longer expect a recession was welcome news for stock market investors even as the “long and variable lags” of monetary policy tightening have yet to be felt.
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LVMH Drops Most in Year as Results Stoke US Worries
This article from Bloomberg may be of interest to subscribers. Here is a section:
Mixed set of results with the stronger-than-expected recovery in China offsetting the decline in cognac, mainly in the US
“Demand for entry-price leather goods, jewelry and cognac from US aspirational customers will not recover immediately and visibility for the rest of the year remains low,” notably due to an uncertain macro-economic environment in China.
Eoin Treacy's view
Luxury goods were one of the primary avenues for betting on the strength of China’s reopening. A narrowing of breadth within the sector is a sign of declining global appetite for high priced aspirational goods. Declining demand for the less desirable brands spreading to the first tier is a sign of caution among consumers and is now also evident in luxury watches. Second-hand Rolex prices are now also falling.
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Rolls-Royce Stock Surges as Turnaround Under CEO Takes Hold
This article from Bloomberg may be of interest. Here is a section:
The upbeat outlook is a vindication for Chief Executive Officer Tufan Erginbilgic, who is in the middle of an extensive turnaround after calling the prime UK manufacturer a “burning platform” shortly after taking over at the start of the year.
The company, which primarily makes engines for widebody jets that connect long-haul destinations, saw demand wiped out at the height of the pandemic when airlines were forced to ground fleets amid travel restrictions and quarantines.
“Better profit and cash generation reflects greater productivity, efficiency and improved commercial outcomes,” Erginbilgic said in the statement. “Despite a challenging external environment, notably supply chain constraints, we are starting to see the early impact of our transformation in all our divisions.”
Eoin Treacy's view
The reason we see conflicting signs of both economic strength and weakness in the global economy is mostly likely because of changing consumption patterns. Consumers have curtailed everyday spending but are still willing to splurge on special occasions. That helps to explain why see declining used car prices at the same time as fans of Taylor Swift are splurging on tickets and demand for summer travel is high. That’s a reflection of how consumers deal with the reality of inflation. They make cuts where they can but are willing to spoil themselves to ensure they can have a feeling on an undiminished living standard.
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Eoin's personal portfolio: July 20th stock index short initiated
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
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