London QT- 13 August – Stocks at record highs: Who’s going to take away the punch bowl?

Global equities continue to ride this out and keep going. The S&P 500 and Nasdaq made record highs as the cooler-than-expected July inflation print buoyed risk sentiment. The S&P 500 climbed 1.1% and the Nasdaq rallied 1.4%, while the small cap Russell 2k rallied 3% because lower-quality stocks do well when rates fall. The MSCI All Country Word Index also made an all-time high. The FTSE 100 rallied a third of a percent to 9,180 this morning, close to a record high. Crypto joined in the risk-on rally with ether at a 4yr high.

The market got a benign inflation reading from the US with the headline CPI at a lower-than-expected 2.7%. But...core inflation rose to a 6-month high of 3.1%. The trick was that tariff-related goods didn’t jump but I still think the market is complacent to think that it’s a sure-fire bet the Fed cuts in September. But Treasury secretary Scott Bessent thinks the Fed could do 50bps in September and blamed a lack of accurate data for not cutting in June.

But investors should watch – the Fed cut 100bps between September and December 2019 and the 10yr bond yield rose 100bps in that time. It’s not a straight line – beware linear thinking. The key is whether this is a recession cut that’s coming (or not coming), or ‘normalisation’.

The dollar fell and EURUSD is nudging up against some resistance at 1.17 while sterling has broken above 1.35 and now looks to take on the 23/24 July peaks around 1.358/9 to continue this run.

Circle shares fell after the stablecoin issuer said it will offer 10 million shares. The stock had earlier rallied sharply on a 53% rise in revenues.

CoreWeave shares fell about 10% in after-hours trading after the AI data cetnre firm reported a bigger-than-expected loss.

Salesforce is down 30% this year – CEO Marc Benioff pushed back against the “AI is eating software” thesis put forward by Melius Research.

Speculation: A bunch of the most traded and most volatile names did well as liquidity is the only thing that matters to this market – AST SpaceMobile +8%, Oklo +8%, BitMine Immersion Technologies +7%, Archer Aviation +7%, Opendoor Technologies +6%, Nebius +6%.

A handful in London today - Persimmon completions up 4% and 13% rise in underlying operating profit. Notes uncertainties around the upcoming Budget, Beazley profits down a third, Balfour on track to deliver its target.

Check out EM markets - A turnaround in expectations for China’s growth and a weaker dollar are tailwinds for emerging markets. The dollar is down about 10% this year and fund managers expect further declines. A weaker USD supports emerging markets via lower borrowing costs and allowing their central banks to cut rates.

Finally, RCI Hospitality – which runs strip bars and the like, is a good indicator of how much cash a certain cohort of consumers have to flash. Earnings were a major miss...sales down more than 6% and earnings down 43%...this is a good recession indicator whatever the tech sector is up to.