As Expected
by JDH on August 26, 2023
Last week was as expected. The Republican debate was as expected (nothing happened). Jerome Powell’s speech at Jackson Hole on Friday was as expected (“The inflation fight is not over; I will raise rates further if needed.”).
Also as expected, the end game is near for the “Magnificent Seven” stocks (AAPL, AMZN, MSFT, META, NVDA, GOOGL, TSLA) which are up 93% year to date, but appear to have hit a top and are headed lower. Nvidia announced fantastic earnings, but everyone who wants to own the stock already owns it, so it peaked at $511 on Wednesday, and closed the week at $460, a drop of almost 10% from the peak. That’s as expected when there are no more buyers.
Oil is trending higher, gold is probably trending higher, and Bitcoin has levelled off around $26,000, flat on the week.
What is less obvious is that the employment picture is weakening. While headline unemployment remains low, hours worked are dropping, so while the same number of people may be working, they are working less. That’s a sign of a recession.
Finally, interest rates are not crashing. The Bank of Japan is increasing rates, for the first time in forever, and that’s putting upward pressure on North American rates. Higher rates for longer means the recession will be deeper.
Which is as expected.
More next week.
As Expected
by JDH on August 26, 2023
Last week was as expected. The Republican debate was as expected (nothing happened). Jerome Powell’s speech at Jackson Hole on Friday was as expected (“The inflation fight is not over; I will raise rates further if needed.”).
Also as expected, the end game is near for the “Magnificent Seven” stocks (AAPL, AMZN, MSFT, META, NVDA, GOOGL, TSLA) which are up 93% year to date, but appear to have hit a top and are headed lower. Nvidia announced fantastic earnings, but everyone who wants to own the stock already owns it, so it peaked at $511 on Wednesday, and closed the week at $460, a drop of almost 10% from the peak. That’s as expected when there are no more buyers.
Oil is trending higher, gold is probably trending higher, and Bitcoin has levelled off around $26,000, flat on the week.
What is less obvious is that the employment picture is weakening. While headline unemployment remains low, hours worked are dropping, so while the same number of people may be working, they are working less. That’s a sign of a recession.
Finally, interest rates are not crashing. The Bank of Japan is increasing rates, for the first time in forever, and that’s putting upward pressure on North American rates. Higher rates for longer means the recession will be deeper.
Which is as expected.
More next week.