Connect with us

Economic

PayPal is still out for lunch

Avatar

Published

on

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published.

Economic

The relief process faces great tests

Avatar

Published

on

This is a very special time for those who believe that if you’re good all year long, a cuddly snow-haired man will show up laden with gifts. It writes a list and double-checks it (subject to data protection requirements). Yes, Jay Powell is coming to town.

Once again, markets are in the grip of excitement over the prospect that the Fed chairman will finally make the change of heart that investors have been craving all of 2022.

inflation in the United States It has come off a bit of a boil, with the annualized rate at 7.7 percent in the latest reading. That could, just maybe, pave the way for the Fed to take a slightly more tentative approach to raising interest rates. So far this year, they’ve increased their rates at a ferocious pace, bashing just about every longtime fund manager on the planet.

The only investors left to toast the end of the year rip to rip were hedge fund managers who were bullish on the dollar negative on government bonds. End of the year drinks are upon her, with her double-digit revenues and slightly smug smiles.

Advertisement

For everyone else, this year has been a blast Really humbling experience, with stocks crashing and bonds failing to provide the usual balance. But with this small downturn in inflation helping stocks and other risky markets recover, Powell added more fuel to the fire this week when he said in a letter to the Brookings Institution that a slower pace of rate hikes could happen.Once a December meeting“.

Commerzbank described this formula as “six magic words” that overshadowed all of Powell’s most hawkish statements at the event. The bank noted that investors had already shifted toward expecting a half-percentage-point rise on December 14, which is down from the three-quarter-point increases we’ve now seen four times in a row. But now, investors are becoming more confident in that view, and wondering if rates might, in fact, fall by the end of next year.

November, in an otherwise terrible year, was really good. If you can take your eyes off the crypto industry train wreck (summary: sorry Sam), you will see gains in everything from stocks and credit to commodities. Deutsche Bank took a look at 38 assets and found that 35 rose during the month. This is “the highest number so far this year and marks a change from the prevailing mood”.

The Standard & Poor’s 500 index of large US stocks jumped more than 5 percent, while the European Stoxx 600 rose nearly 7 percent. Deutsche noted that the Hang Seng Index, also buoyed by hopes of mitigation in China’s anti-Covid-19 strategy, jumped nearly 27 percent, the biggest climb since 1998. Certainly, all of these stock indices are still down a lot over the year. However, a win is a win.

Seasonal patterns, at this time of year known as the Santa Raleigh phenomenon, can help exacerbate this. Skylar Montgomery Koning, an analyst at the research house TS Lombard, warns aloud that this year’s Santa Rally narrative has some serious challenges.

I wrote “User Beware”. “Psychology plays a role,” she added. “Money managers are judged on the annual performance of the calendar year. Given the tendency of stocks to rise towards the end of the year, investors who have lost money have a desire to follow the rally higher, while those who have made money are more likely to settle their books.”

Advertisement

Are fundamental investors convinced? “We’re the Grinch,” says Michael Kelly, head of multi-asset at PineBridge Investments. “We are not participating in this bear market rally.” (That’s no, then).

Only conservative fund managers have long played the hedge fund manager, says Kelly. When the long-awaited American recession begins to unfold next year, and the health of American companies really begins to deteriorate, stocks will fall to the ground, in his view.

“I’ve never seen so many people convinced that someone else is going to keep the market higher and that they’re going to get out before things get worse,” he adds. “Good luck with that.”

The difficulty, of course, is that bear market highs look and smell very much like proper rallies, up until the point where they break down and risky assets start to slide again. We saw that in March and July, and it looks like we’re doing it again now. It is unusual for fund managers to be as pessimistic as they are now even after the MSCI World Equity Index rose 12 per cent in two months. But after a grueling year for investors, perhaps it’s no wonder some are waiting for something to go wrong before 2023 rolls around.

Others may be heading for a collision with reality, particularly if they underestimate the Fed’s resolve to defeat inflation, especially in light of the strong US employment data on Friday. “The latest inflation data sparked euphoria and expectations of a more extravagant (i.e. lower rate hike) Christmas,” wrote Elwyn de Groot, head of macro strategy at Rabobank. “This suggests that markets may have to learn the hard way when it turns out that the number of presents under the Christmas tree is not as expected.”

Advertisement

katie.martin@ft.com

Source link

Continue Reading

Economic

Wall Street Looking for Recession Game to Cap Potential Disruption in 2023 By Reuters

Avatar

Published

on


© Reuters. FILE PHOTO: A sign on Wall Street outside the New York Stock Exchange in New York City, New York, US October 2, 2020. REUTERS/Carlo Allegri

Written by David Randall

NEW YORK (Reuters) – Investors are eyeing everything from the U.S. health care sector to British stocks and gold as potential havens during a recession, as concerns grow that the Federal Reserve’s rate hikes will lead to an economic downturn next year.

Gloomy forecasts for the year ahead have accumulated from Wall Street banks in the past week, though the strong November jobs report released on Friday undercut the case for an impending slowdown in the US economy.

JPMorgan (NYSE:), Citi and BlackRock (NYSE:) are among those who believe a recession is likely in 2023. While an economic downturn is uncertain, strategists point to massive monetary tightening by the Fed, and a sharp slowdown in the housing market. and an inverted Treasury yield curve as reasons to expect growth to stall.

Advertisement

Recessions are usually bad news for stocks, although some investors believe that the sharp drop in stocks in 2022 indicates that some degree of slowdown has already been factored in. It has fallen as much as 25.2% from an all-time high this year, compared to an average decline of 28% the index has recorded in recessions since World War II, according to CFRA Research data. The index is down 14.6% year-to-date.

However, many on Wall Street are increasing allocations to market areas that are notorious for outperforming during turbulent economic times.

“When investors see a recession, they want companies that can generate income regardless of the business cycle,” said Jack Ablin, chief investment officer at Cresset Capital, which expects a mild recession in 2023.

In their outlook for 2023, the strategists at BlackRock Investment Institute recommended stockpiling in the healthcare sector, an area where demand is believed to be less sensitive to economic fluctuations. The S&P 500 Healthcare Index is down about 1.7% year-to-date, easily outperforming the broader index.

BlackRock said the company also favors energy and financial stocks, although it underweights developed markets as a whole.

Advertisement

“A recession is expected, and central banks are on their way to excessively tightening policy as they seek to tame inflation,” the firm’s strategists wrote. “Stock valuations do not yet reflect the upcoming damage, in our view.”

JPMorgan analysts expect a “moderate recession” and expect the S&P 500 to test its 2022 lows in the first quarter of next year. The bank said above-average valuations and Fed hawks make US stocks unattractive compared to other developed markets, and called the UK its top pick.

BoFA Global Research expects US stocks to close broadly flat in 2023, but expects gold prices to rise as much as 20%, supported by a weaker dollar. Raw materials such as gold are priced in dollars and become more attractive to foreign buyers when the dollar falls.

Meanwhile, Citi said that recession fears and weak earnings growth will hurt US stocks in 2023 and advised clients to “treat rally in US stocks as bear market rally”. By contrast, they are overweight in China, and expect Chinese stocks to receive a boost from the easing of COVID-19 restrictions and government support for the real estate sector.

Fourth-quarter earnings for the S&P 500 are expected to decline 0.4% from the same time period a year ago, before rebounding throughout the year and reaching a growth rate of 9.9% in the fourth quarter of 2023, according to Refinitiv data.

Advertisement

Next week investors await economic data from the US services sector, which grew at the slowest pace in nearly two and a half years in October.

Not everyone takes a recession for granted. Signs of ebbing inflation fueled hopes that the Federal Reserve may tighten monetary policy less than expected, supporting a recovery in the S&P 500 that boosted the index from its October low.

Lucas Kawa, an asset allocation strategist at UBS, believes that stock prices are already taking into account recession risks. He expects some of the factors that hurt markets in 2022 — including weaker growth in China and Europe — to reverse next year, supporting asset prices.

“There is a good chance that the headwinds of 2022 will turn into the tailwinds of 2023,” he said.

Garrett Melson, a portfolio strategist at Natixis Investment Managers, expects a so-called soft landing in which the US economy grows at a moderate pace, with higher interest rates weighing on consumers without crushing spending completely.

Advertisement

He is bullish on small US stocks, which he believes weighed in the recession. Russell’s Small Capital is down about 16% this year.

“The market is looking a bit sneaky here with the consensus that a recession is inevitable,” he said. “The path to a soft landing is probably broader than what is the consensus view now.”

Source link

Advertisement
Continue Reading

Economic

France hails the “breakthrough” in the EU’s dispute with the United States over climate law

Avatar

Published

on

French Finance Minister Bruno Le Maire said US President Joe Biden’s offer to overhaul provisions in his main climate package to help US allies is a “breakthrough” that will help calm European anger over potential damage to its green tech companies.

Le Maire’s comments came after French President Emmanuel Macron pressed Biden during a three-day state visit to Washington to look into the damages of the law, known as Inflation Reduction Act It could be on the EU. Macron had put forward $400 billion in stimulus to fund the green transition in the United States as “Very aggressive against European firms” and risk “dividing the West” by unfairly distorting competition.

But Le Maire said Macron and the US president had made significant progress in their talks on the IRA, and officials would now work closely on the details in the coming weeks.

I really think state visit. . . It’s a turning point,” he told the Financial Times.

Advertisement

special one sore point The subsidies have been for US-made electric cars, which have been criticized by the European Union, South Korea, Japan and the United Kingdom as discriminatory against their companies and a violation of World Trade Organization rules.

Speaking at a joint press conference on Thursday, Biden said He was open to addressing the concerns of the European Union because the intention of the United States was not to harm the region or exclude allies. Instead, he explained, the IRA aimed to bolster US supply chains to reduce reliance on Chinese products for clean energy and electric vehicles.

“There are adjustments we can make that could make it easier basically for European countries to participate or to be on their own, but that still needs work,” Biden said.

Biden mentioned one potential change: Rewording a provision in the law that grants exceptions to domestically made content rules to allow for subsidies on electric vehicles and renewable energy technology as long as the country in question has a free trade agreement with the United States.

This was added by a member of the US Congress, who admitted that he only meant the allies. “He didn’t literally mean the free trade agreement,” Biden said. “So there’s a lot we can do.”

Advertisement

Le Maire said such a change would be an important win for Europe and help ensure the region’s businesses remain competitive in the race to a low-carbon economy.

“It’s a huge breakthrough to say: They are our allies, they are our friends, so even if we don’t have a trade deal with Europe, we will look at the European components in the same way as those in countries that do have a trade deal.”

“It’s not an amendment, it’s an important policy choice” by the Biden administration, he added.

It remains to be seen how such a change will be put into effect, given there is little chance of reopening or amending the IRA legislation itself. French officials have suggested that this could be possible through executive orders by the president or through regulations specifying how the law should be applied.

The White House on Friday declined to comment further on the specific changes being considered. The President has been clear that there are ways we can address Europe’s concerns. “This is an issue that we are working to resolve through substantial consultations with our European partners,” said a White House spokesman. “We will not advance in this process.”

A task force set up by US and EU officials will continue to meet to work through the issues with the IRA, and the matter will also be taken up at a meeting of the US-EU Technology and Trade Council on Monday.

Asked if Macron had threatened Biden to take the matter to the World Trade Organization, Le Maire said he did not have to do so because the two countries’ strategic goals are the same – building strong industries in green technologies.

“No one wants a trade war in the situation we are in,” he said, referring to the war in Ukraine and the economic repercussions from high energy prices.

Advertisement

“We have one competitor called China. It seems to me that the strategic goal of the United States is not to weaken Europe, but, on the contrary, to act in partnership with Europe.

Source link

Continue Reading
Advertisement

Trending