Have we ever had the “pivot shot” – stupidity trap or true vision?

As for me, personally on my own, I’ve been pretty optimistic ever since I walked into a trading room and when my hair was still approximately dark brown instead of desperately white. High, because statistically, in the long run, the market goes up more than it goes down and I’d rather be on the winning side 80% of the time and bet on the return of the forces of good when things go wrong rather than betting on the end of the day. world and the fact that we find ourselves in an environment as joyful as the last Mad Max. But still, right now, I struggle to understand the market’s reactions.

October 25, 2022 audio


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Deja vu but we persist and start again

Let’s keep it simple: last night the market ended because, and I quote: “participants are starting to believe that the Fed could start considering entering a pivot process following the recent macroeconomic numbers (and there’s a Wall Street Journal article)” To explain the thing – apart from the article in question which was widely discussed yesterday – it should be understood that yesterday the Composite PMI came out at 47 and dust, against 49.5 last month and 49.3 expected by the finance stars.

So, in addition to the fact that “Wall Street Experts” ONCE AGAIN masterfully wallowed in their predictions – something that no longer surprises anyone, as it has become so “common” – the market interpreted the thing as a DIVINE signal that finally left see the light at the end of the tunnel and hope with great confidence and almost 51% certainty that the light in question is not a TGV that reaches 300 per hour – Yes, the market said “this time it’s good, the Fed manipulations and Jerome Powell’s inflation mantras ARE working – HIP-HIP-HURRAY for the FED – inflation is therefore in the process of retreating (at least that’s what we thought last night) and that even though we know that next week the Fed STILL raises rates by 0.75%, the Wall Street pundits – the same ones who spoil oil inventories every week, the same ones who think Netflix gained 1.1 million new subscribers as we speak in more than double. The same ones who are losing ing views on the jobs numbers for the year and the SAME guys who thought the last PMI of the LAST MONTH was going to force the Fed to consider a policy pivot, well, the same guys think THIS IS THE MONTH THE FED WILL ROCK… In the end , it wasn’t last month that they got it wrong, no, no, this time for sure, it’s this month. You can officially open the champagne and caviar! Have faith, good people, the bull market is back!!!!

PIVOT is coming soon

So here it is. The markets are in the recovery phase, as they were last month with the publication of the SAME number yesterday. Last month the “good news” PMI was squashed by 3 days because actually – well – inflation wasn’t going down that much and the FED told us the PIVOT it COULD go down. wait until 2023 for the Fed to consider calming things down, but this time it’s not quite the same. It’s not the same because oil is cheap, supply at the pump is falling, and on top of that everyone has seen the latest gasoline chart that shows prices have dropped because the weather is nice and warm this fall in Europe and gas inventories are full and we can all heat our living rooms to 27 degrees and the mayor can go fuck himself with his turtleneck.

So here we are at peace. Victory is near. The Fed and other central banks around the world are winning the fight and as usual; in the end, the Bulls win. It remains, therefore, to confirm the test and say that this time the rally is for real and that the recession will not pass us by (at least not in the United States, because in Europe we know very well that we are in the middle of it, but it is almost over ). Yesterday, the markets were therefore filled with optimism that, yes, the Fed will raise rates again next week, but now it is more than likely that its active members will “start” to revise their policy and put the brakes on rising rates. Or at least consider it in a less aggressive way. If you were looking for a fundamental reason to justify yesterday’s increase and perhaps officially announce the start of a new rally that could FINALLY last, you’ve found it.

BUT…

So yes, everything is fine in the best of all worlds and, like last month, we are betting on a rally, constant, lasting, easy to play and obvious to everyone. Except let’s still remember that if all central bankers are banned from speaking before next week, Ms. Yellen, the current Secretary of the Treasury, is not, and last night, Ms. Yellen said the following:

“We have had energy shocks, food shocks, supply shocks, persistent inflation in many countries around the world, rising interest rates in many parts of the world and we have seen some market volatility and increasing liquidity and credit concerns.

And then she added:

“We are very focused on the bond market”, adding that “it is extremely important that this market is deep, liquid, works well and serves as a reference for all other assets. »

At the same time implying, in his words, that all is not so well. If the Treasury bond market starts to be a problem, I dare not even imagine the extent of the consequences of the current situation. We saw what happened the other day with the UK version and the fact that we’ve just lost a “Lehman Brothers TWO, the return of revenge markets that we don’t really understand but that could turn around any minute”. But well, in short. We don’t care because the markets noticed that the PMI was worse than expected and therefore anticipated a FED PIVOT even though the Fed’s last words – before muzzling it for the Black Period Before the Fed’s meeting in next week – had been: “PIVOT will not pass us by until 2023”.

Therefore, it is extremely reassuring to see that we – investment experts – have been able to anticipate the Fed’s moves and its reactions to economic publications. All that remains is for all of this to be confirmed next week. Or not. However, we will be able to focus on the numbers for the quarter, knowing that things will go well, as we are at the dawn of a new BULL MARKET and that – as everyone knows – in general, after mid-term elections, there are ALWAYS (well , almost always) a massive recovery to celebrate the power or not of the president in power. In short, happiness is in the meadow and the meadow is there, right in front of us and we just have to bend down to catch happiness. As long as Putin will allow it, as long as Xi Jinping will allow it, as long as the economy will allow it, as long as the Fed will allow it and as long as the numbers of Apple, Microsoft, Google, Amazon and others allow us. this.

In Asia and the world to our knowledge

This morning, all of Asia (for once) is in the green and recent fears about Xi Jinping’s policy are already ranking vertically. As long as China’s new triple president doesn’t reset the entire country while invading Taiwan with the other side, it should be fine. At the moment, we feel that Chinese growth could pick up again (if we let it), but there are still too many “ifs” to go straight ahead. Yesterday, the Hang Seng was shot down because of Xi’s policies and this morning it recovered 0.8%, but with no justification for using undeclared accounts to rescue Asia.

Otherwise, it is disconcertingly calm. As we KNOW the FED is getting ready to spin, gold is not doing anything anymore, oil is on PLS and Bitcoin is frozen in the space-time continuum. As if suddenly NO ONE cares about ANCIENT CRYPTO. This is not how we are going to wake up the bubble that is dormant in us.

News of the day to note

In the things to remember yesterday, we noticed that Tesla was downgraded by Morgan Stanley and that it rained only moderately on the stock price which lost 1.5% during the session and 1.5% after the session. Most impressively, it seems that most of Tesla’s “big fans” are cowering and starting to look the other way. Even though Musk keeps gesturing on stage to say he’s going to buy back shares, put autopilots in his cars, make an offer: a Tesla bought and a Starlink satellite offered (since it’s crap that doesn’t work anymore because it’s only dedicated to Ukraine) . In short, we get the impression that everyone is moving away from Tesla, and on top of that, we’re starting to hear here and there, that “the other” electric car makers – who are all in the process of adding hair dryers to their line – are catching up to Tesla and that could eventually hurt sales numbers. Furthermore, Musk announced that he is lowering the price of his cars in China. What a coincidence.

Otherwise, Rishi Sunak becomes the British Prime Minister, and so it is to him that James Bond will have to swear allegiance. The man is apparently a multimillionaire, not to say a billionaire in the singular. We wonder why he’s in politics anyway, he must be really bored at home. Finally, the truth is that he finds himself in charge of a country with a lot of money in the account and that he will have to explain to his fellow citizens that things are going to be fine for the gas and electricity bill, especially that the gas ended up going down quite recently. Fortunately, the English league remains to create a diversion. And the World Cup in Qatar. Otherwise, we’re talking about Xi Jinping’s policy and what investors “must” do, about the Microsoft numbers that will be released tonight and that may be “less” easy than usual. From some Meta shareholders who are starting to cringe demanding less spending in the Metaverse and more layoffs in real life.

day numbers

Now that WE KNOW the Fed is going to turn. One day. We can start focusing on the rest. And the rest are the numbers of the day. On the economic side, there will be Business Expectations in Germany, housing prices that remain a major stress in the US, then there will also be consumer confidence and the Redbook. On the quarterly side, we will have Novartis and UBS this morning in Switzerland, then in the US, there will be UPS, GE, GM, Halliburton and Coke BEFORE opening, then there will be Microsoft, Google, Visa, Spotify and Texas Instrument after closing. I’m sure we’ll have a lot to talk about tomorrow morning!

Until then, have a great day, courage, and see you tomorrow!

Thomas Veillet
invest.ch

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