The Morning Call---Recession: expectations versus reality

 

The Morning Call

 

8/1/24

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/bonds-gold-soar-july-amid-dotcom-style-collapse-crowded-trades

 

Note: the S&P closed out July with a bang. The good news is that (1) the gap down open from last Wednesday has been filled and (2) the index ended the day above both its 50 DMA [if it remains there through the close today, it will reset to support] and the former lower boundary of its very short term uptrend [though that trend is over]. However, it did so on a gap up open which will need to be filled. Directionality remains a question until it either makes a new lower high or it pushes through the last lower high. If you are dying to ‘buy the dip,’ I wouldn’t do anything until it clears that prior lower high.

 

            The bond market drives everything.

            https://allstarcharts.com/heres-whats-actually-driving-things/

 

            Equity fear stays strong.

            https://www.zerohedge.com/the-market-ear/equity-fear-stays-strong

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                       

 Weekly initial jobless claims totaled 249,000 versus predictions of 236,000.

 

Q2 nonfarm productivity was up 2.3% versus forecast of +1.7%; unit labor costs were up 0.9% versus +1.8%.

 

  June pending home sales were up 4.8% versus consensus o +1.5%.

                          https://www.advisorperspectives.com/dshort/updates/2024/07/31/pending-home-sales-rise-4-8-in-june-more-than-expected

 

                          The July Chicago PMI came in at 45.3 versus expectations of 45.0.

                           https://www.advisorperspectives.com/dshort/updates/2024/07/31/chicago-pmi-retreated-in-july

 

                        International

 

                          The June EU unemployment rate was 6.5% versus estimates of 6.4%.

 

The July Japanese manufacturing PMI was 49.1 versus projections of 49.2; the July Chinese Caixin manufacturing PMI was 49.8 versus 51.5; the July German manufacturing PMI was 43.2 versus 42.5; the July EU manufacturing PMI was 45.8 versus 45.6; the July UK manufacturing PMI was 52.1 versus 51.8.

 

                        Other

 

            Monetary Policy

 

The FOMC completed its July meeting leaving rates unchanged (expected) but with a slightly more hawkish tone in the official press release.

https://www.zerohedge.com/markets/fomc-18

 

And the pundit class seemed to agree.

https://www.zerohedge.com/markets/fed-did-not-tip-september-cut-any-stretch-wall-street-reacts-fomc-statement

 

              But the Market got jiggy with it (see above).

 

              The Bank of England cut rates.

              https://www.zerohedge.com/markets/bank-england-cuts-rate-50-5-4-vote-offers-no-timing-next-move

 

              Latest EU inflation number a blow to rate cut hopes.

              https://www.wsj.com/economy/global/eurozone-inflation-picks-up-pace-in-blow-to-rate-cut-hopes-e4a7e116?mod=economy_lead_story

 

            Inflation

 

              Comparing CPI versus the PCE price indices.

              https://www.advisorperspectives.com/dshort/updates/2024/07/31/two-measures-of-inflation-june-2024

 

            Recession

           

              Expectations versus reality.

  https://edgyoptimist.substack.com/p/the-either-or-economy?utm_source=post-email-title&publication_id=2450694&post_id=147162579&utm_campaign=email-post-title&isFreemail=true&r=kc1ir&triedRedirect=true&utm_medium=email

 

 

    Bottom line

 

            Gambling versus investing.

            https://www.acadian-asset.com/investment-insights/owenomics/gambling-nation

 

            Three reasons not to bet on long term bonds.

            https://www.morningstar.com/bonds/3-reasons-not-venture-out-too-far-yield-curve

 

            Growth versus value.

            https://williamhgross.com/value-versus-growth/

 

            Commodities, bitcoin, and stocks.

            https://disciplinefunds.com/2024/07/29/three-things-commodities-bitcoin-stocks/

 

    News on Stocks in Our Portfolios

 

C.H. Robinson Worldwide press release (NASDAQ:CHRW): Q2 Non-GAAP EPS of $1.15 beats by $0.19.

Revenue of $4.48B (+1.4% Y/Y) misses by $40M.

 

Cummins press release (NYSE:CMI): Q2 GAAP EPS of $5.26 beats by $0.50.

Revenue of $8.8B (+1.9% Y/Y) beats by $450M.

 

 

What I am reading today

 

            Coastal civilizations that disappeared under the waves.

            These ancient cities sunk to the ocean floor. Here's how they were rediscovered. (nationalgeographic.com)

 

 

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