Senior Relationship Manager
Summary: Saxo calls Stagflation
Good Morning,
SaxoStrats is changing its outlook for the US from non-recession to stagflation, and this has consequences for our outlook for interest rates and stock markets. We see a 1 in 3 chance of FED (and ECB) cutting rates before yearend and a 2 in 3 chance it will happen during Q1/Q2-2024. The main changes stems from the big increase in real rates which leaves funding costs for US almost too high to carry as seen by recent Fitch debacle, but also the big increase in cost-of-consumption. The interest rates on everything from credit cards, new cars to mortgages is trading 2 times the long-term average and is almost punitive. Finally, job data and spending seems to slow down while inflation through wages and energy remains stubbornly sticky. Low growth and semi high inflation equal Stagflation.
Markets seem nervous across the board:
For once there are positive news out of Germany , Taiwan Semiconductor announced a significant investment in Germany with 3.5 Bio Euro and VW outsold Tesla for Electric vehicles. The GER40 recovered from a low at 15700 to 15870 now.
Todays economic Agenda is fairly empty, watch the US yields as our Althea points out: This week’s US Treasury auctions and good CPI numbers might drive US Treasury yields lower, but their uptrend will likely remain intact. If current market levels hold, the new 10- and 30-year US Treasury bonds will price at the highest yield in fourteen and eleven years, attracting high investor demand.
The next planned key event is the US CPI tomorrow at 14:30 expected at 0.2% core. Worth noting is the fact that US online prices declined 1.6% from a year ago.
Wednesday August 9
Data: China CPI,
Earnings: Sony, Wendy`s, Disney, Sonos,
Thursday August 10
Data: US CPI, US Job data
Earnings: Baba, Novo Nordisk, Ionq, Wheaton,
Friday August 11
Data: China Money supply, UK GDP, US PPI
The end of the road
Emboldened by surging crude oil prices, Saudi Arabia makes waves on the international stage, as Crown Prince Mohammed bin Salman manages to create a World Champions League, after buying the UEFA Champion League franchise.
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.