We have seen that huge market rally, not only here in the US where we extend that
those gains. As this chart shows our viewers with the
S&P 500 further into bull market territory, the NASDAQ 100 gaining more
than 30 percent from its 20 22 lows, even E stocks almost at that bull market
territory. So is this fraud in this what we're
seeing right now, especially if we have also concerns about what will liquidity?
Yeah, I mean, obviously, there's a macro question as market question, right.
So if we look at the macro question first, we still think we're sliding
towards a recession. See, trying to time that is going to be
very difficult. But, you know, all the indicators, all
the recession checklist indicators that we look at are moving more and more
towards signaling a recession is coming. So that is obviously at some point going
to CAC to be a headwind for equity markets.
In the short term, though, we still have very positioning, which is very short or
underweight global equities. And you alluded to the inflation
numbers. Obviously this week you're going to be
really important. Then there is a good case to be made
that inflation will come in lower in the coming months, which may temporarily
give this soft landing scenario more countenance in the markets.
Ultimately, you think that's going to be disappointed, but that could still lead
to the continued melt up in equities in the short term.
Yes, some are saying that if we do see a mild downturn, the soft landing, that we
could see another round the cyclicals and given, of course, are we all ready
saw moves from China to boost their economy.
Could that all add up to some gains in sectors that have been really under
pressure lately? Yes, absolutely it could.
I think the narrative is probably going to be one that we do see people becoming
less concerned about a sharp recession. Ultimately, I think they'll be
disappointed because, you know, the size of the tightening and the long lags that
we have in terms of hitting the economy. I think we will see, you know, slightly
stronger than expected recessions and harsher recession than next than normal.
Nothing GFC like, of course, but something that would be, you know,
pretty damaging to sentiment. But as I say, the challenge is when do
you time that? Do you time that so that the coming
quarter. Well, would you say it's going to be
towards the end of this year, beginning of next year?
And that's that's hopefully the hardest question to answer in our opinion.
Steve, how are you gauging market expectations when it comes to what we
get from the BBC and other Chinese authorities?
We sort of almost inevitably setting up a disappointment because we know that it
is not going to be either a massive move from the central bank there.
Yeah, I think obviously the key thing that's happened this year to two key
things is we've seen real GDP growth accelerate quite strongly, of course.
I mean, you'll see some narrative around disappointment.
It shows how strong that is proven. But the reality is it has been pretty
strong. But we've seen at the same time
inflation come choppy la VIX in negative territory and CPI around zero.
So nominal GDP growth hasn't really done a lot.
It's a cut of rates marginally. So I think the authorities are still in
an easing policy environment. But clearly they still don't want to
repeat anything on the scale of what happened in 2008.
So it's softly, softly. And that's going to support growth in
our opinion. But given the global headwinds, the
question is, when do we see peak growth? Do we see it in the first half of this
year or do we see a resurgence in the second half?
We're starting to see consumer confidence in China bouncing off very
depressed levels, of course, but it is starting to bounce.
So that suggests that maybe second half will be OK.
But I think, you know, coming into the beginning of next year, we could see a
deceleration. So policy easing, yes.
But still gradual from our perspective.