Brace, Brace, Brace and a new bull market

Yesterday was useless. In fact, there are two or three quarterly data that made two or three stocks vibrate and that confirmed that there were still few investors who were awake in the heat of August, but we are not going to lie to each other; the concern is clearly centered on this afternoon’s employment data and whether we could exit the bear market and enter a new bull market. Everyone doubts it and no one is really convinced, will this be enough to take the Bears on the wrong foot? Or will the economy suffer a blow that will go down in history?

The audio of August 5, 2022


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A day in the waves or in the waves

Put simply, the European indices closed in very light green. The conviction is not very frank and without the green light (also) of the Americans, the indexes of the old continent could not go very far. At least there was no mention of Pelosi and suddenly no one was interested in China anymore – if anyone was interested in the last few days – in the United States, the Dow Jones and the S & P500 went down as the Nasdaq continued its irresistible rise. The tech index is up 20% from its June lows and we are starting to wonder if we are starting something new, something like a “NEW BULL MARKET”.

It must be said that it still seems too easy. The inflation problem has not been solved for a long time – in fact yesterday the Bank of England raised rates by 50 basis points, warning that inflation could quickly rise above 10% and warning Queen Elizabeth’s subjects that it would not they were heading for a calm sea with a 3 knot breeze in the sails and that might be a bit more complicated than with a long and painful recession looming on the horizon. And this is where it’s hilarious: you have a central bank raising rates and saying it’s going to be shit, making you feel on the verge of depression, maybe even suicide, and the UK market doesn’t even end. So yes, I know the UK market is still a very special market, but nonetheless. We believe that nothing can lower global indices, we are so afraid of losing the next hike. In 2008 we didn’t want to lose anything anymore, so we sold everything and in 2022 we don’t want to have a loss of profit or a loss of RE-profit, which we no longer dare to sell.

Nothing is solved

However, as I said at the beginning of the paragraph; nothing is solved. Inflation is absolutely not under control, the absence of recession is absolutely not guaranteed. And by far. Quarterly figures are less worse than expected, but guidance remains very cautious overall, as are engagement levels. Not to mention the fact that the number of companies firing outright remains relatively high. The data on American employment that will be published this evening will also undoubtedly be the keystone of the continuation of the Baby-Bull Market in which we are or simply the trigger of a new sell-off, knowing that many indicators indicate that we are overbought. .

So this afternoon, the US Department of Commerce will announce how many jobs were created in July. How many ice cream makers have been hired and how many beach boys have found a job for three weeks in addition to a job in a restaurant in the evening and in a factory to check stocks at night. The “Wall Street Experts” predict a figure of 250,000 versus last month’s 372,000. But to be fair, it has already been said that 250,000 is a relatively conservative random number – however in authorized circles of “Wall Street Experts”, a circle where neither you nor I are not – we already say that if it is above 200,000. All right. And that would mean that the economy is “holding up” and that we are “not yet” in a recession. If, on the other hand, the figure is less than 200,000, you will have to fasten your seat belt and put yourself in the “short, brace, brace” position for a landing that will be described as “BRUTAL”, waiting to see the word “RECESSION” ticking on all the financial media.

At the crossroads

So here we are at a crossroads, or the indices continue to run up and we will look for the 200-day moving averages to start talking about “new secular bull market” and have a parade of finance stars on the CNBC set that will all come and go. they will say “I told you so”. Well, I prefer to stay another week on vacation so as not to see the dizzying descent towards the average of 50 days. In any case, when I look at the opinions of the big Berthas of American financial research, I tell myself that there is no trust. It is also because no one believes it could continue to rise.

In any case, JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America and I forget a few, they all tell us that we will not get rid of inflation in two tablespoons, that the recession is upon us and that the volumes and “Inflows” accompanying this “summer rally” are not convincing enough for growth to be truly lasting. Not to mention that the investment banks themselves believe that we still have a big risk on the price of oil (at 130 dollars) while the barrel has only been down for a few days. Black gold is currently at $ 88.90, but everyone warns that this is not “playable” and that mining volumes are insufficient to justify such a low price in the long run. Furthermore, in order not to surprise us as consumers, Swiss petrol stations have decided to keep the price of gasoline as if the barrel were at 130 dollars, as we are used to.

In short

So here we are in an area of ​​total interrogation. This famous area where we say to ourselves: “well, do I still have to buy it or will we end up having one ??? “Normally, we should have the start of a response tonight and if the indices aren’t enough, we’ll have to wait for next week’s CPI to find out if the Fed is too strong and if inflation has really peaked. It will stay then. to see if it is “already in the price range or not.” One thing is certain, in the coming days will be the psychology of the markets strewn with questionable economic fundamentals that will be at the forefront of the wonderful world of finance and everything in between while the FED and the ECB I am in vacation.

As for individual companies, we have Door Dash’s “good numbers” – you know, the box that delivers lukewarm meals in cardboard boxes – well the numbers weren’t that bad and the loss of “only” 30 cents per share. The stock gained 13% after the close and traded at $ 92. It’s still a long way off $ 256 for the month of November, but apparently that’s good news. Also worth noting is Coinbase which acquired almost 100% during the week and which yesterday announced a partnership with BlackRock to give direct access to cryptocurrencies to large institutional clients. The stock took 10% higher yesterday. On July 27, Coinbase was trading at $ 55, yesterday it hit 115 and closed at $ 90. We see that the movements of some stocks are perfectly healthy and not at all manipulated. We also note that Tesla has voted for a new split and that Elon Musk expects a “mild recession” that should last 18 months and possible buybacks of Tesla shares. Yes, because Musk is also an economist above all else.

And now?

Currently, futures are up 0.3%. France will publish its trade balance, but nobody cares because at 2:30 pm we will know if we are in a new bull market or not, once we know the employment data. I would like to mention one more thing: this morning I looked for the necessary conditions to announce the official death of the Bear Market, the answer is long and complex, but let’s say, to put it simply, it is not yet won. On the other hand, it is better to live in the USA where we still believe that everything is still possible, than in England where we are convinced that everything is messed up.

I just have to wish you a great weekend, a beautiful Friday and rest assured, the holidays are almost over, you will put the children back in school and finally we can talk about the KRACHS season !!!

See you on Monday!

Thomas Vellet
invest.ch

“The best way to predict the future is to invent it”.

– Alan Kay

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