A Regime-Shift In the Fed’s Reaction Function. 75-basis-point rate hike at the Fed’s meeting this week is more or less a done deal. The outlook from then on is harder to predict. With the economy cooling rapidly, traders expect the Fed to pause its rate-hike cycle after this year. Bloomberg Economics believe market participants have underpriced the amount of tightening needed to tame inflation, the Fed’s current priority. Bloomberg Economics expects a steeper and higher path for the fed funds rate than what’s currently priced in the market. We believe the fed funds rate will reach 3.75%-4.0% by the end of the year, compared to market expectations of 3.25%-3.5%. Most traders expect the Fed to keep rates at that level until mid-2023. We expect the central bank to continue hiking until the upper end of the target-rate range reaches 5% in mid-2023 -- up from 4% in our previous forecast.

함의: 시장은 인플레이션 통제를 위한 중앙은행의 행동을 과소평가하고 있으며, 연말까지 3.75%~4.0%, 그리고 내년 중반까지 5%까지(이전 예상은 4%) 금리인상을 멈추지 않을 것으로 봄.

The Federal Reserve’s interest-rate hikes are wearing out their welcome in bond markets, with a measure of the yield curve that Chair Jerome Powell has highlighted as a recession indicator sending out a warning message. The difference between rates on where three-month bills are now and where they will be in 18 months has tumbled about 95 basis points in July, the biggest monthly decline in data starting in 1996. A vast swathe of the US yield curve inverted in recent weeks as recession fears spurred investors to pile into longer maturities. That spread peaked soon after his comments, and is now dropping fast enough to fall below zero at some stage in the next month. “Rates markets pricing in 2023 Fed rate cuts imply the market is expecting the Fed to pivot on rising recession risks,” said Prashant Newnaha, a strategist at TD Securities in Singapore.

함의: 채권 시장 참여자들은 중앙은행의 정책 방향에 정면으로 반대하고 있으며, 그 결과로 1996년 데이터 산정 이후 월간 기준 최대 스프레드(3개월물의 현재와 18개월 뒤 차이) 낙폭을 만들면서 역전도 가능한 기세로 움직이고 있음.

Optimism that inflation may start to slow and the Fed will become less hawkish has buoyed growth stocks. The MSCI Europe Growth index is up more than 7% in July, spurred by a surge in tech, which outperformed cyclical, value and defensive peers. "The turn in interest rates suggests that the recent better performance of growth style over value can continue," said JPMorgan strategists led by Mislav Matejka.

함의: 어느 국면에서든 거시경제 변수가 투자 스타일의 성과를 좌우함.

European Union countries reached a political agreement to cut their gas use by 15% through next winter as the prospect of a full cut-off from Russian supplies grows increasingly likely. Energy ministers meeting in Brussels gave the green light to a proposal to voluntarily cut their gas usage over the next months, the Czech presidency of the EU said in a post on Twitter. The plan makes the 15% target mandatory under an emergency situation -- such as a severe disruption to flows from Russia -- albeit with certain opt-outs for particularly vulnerable nations or those integral to the bloc’s network as a whole. Hungary was the only country that voted against the rules, Luxembourg’s energy minister Claude Turmes tweeted. 

함의: 비상상황에서 가스 사용량 15% 감축이 합의에 도달했으며, 유일한 반대표를 던진 곳은 헝가리였음.

This Thursday we get the preliminary reading of 2Q GDP, and it’s possible that the reading will be negative. If it’s negative, then that’s two in a row. And then we’ll get a big fight about whether that should be called a recession or not. There are basically two views on this question, but I will point out one thing. With every recession since the end of WWII, the US unemployment rate was either climbing prior to the declared recession, or it rose during the period where a recession was declared. That’s not the case in the first half of 2022.

함의: 이번에도 경제성장률이 마이너스일 경우 침체라 불러야할지 아닌지 치열할 것이지만, 2차 세계대전 이후 침체 전 항상 실업률이 먼저 높아졌으나 올해는 그렇지 않음.

IMF Cuts World GDP Outlook a Third Time as Inflation. The International Monetary Fund cut its global growth outlook for this year and next, warning that the world economy may soon be on the cusp of an outright recession. Global economic expansion will likely slow to 3.2% this year, less than the 3.6% forecast by the fund in April and the 4.4% seen in January, the IMF said in an update to its World Economic Outlook released Tuesday. 

함의: 경제성장률 하향을 여러 번 하게됨.

The Kremlin is likely to keep vital gas flows to Europe at minimal levels as long as the standoff over Ukraine continues, ratcheting up the pressure on the European Union over its tough stance on Russia’s invasion, according to people familiar with the leadership’s thinking. If the squeeze drags into the winter, it could leave the continent, traditionally Russia’s largest export market, desperately short of the fuel.

함의: 러시아는 우크라이나 침공에 맞서는 유럽을 에너지를 볼모로 계속 위협할 것임.

The major 10 am US data releases disappointed expectations, with consumer confidence printing 95.7 versus an expected 97.0. The labor differential edged a little lower, from 39.9 to 37.8, but remains very high by the standards of history. Clearly inflation is impacting consumers’ sense of well-being, which doesn’t exactly argue for the Fed standing down, does it? New home sales, meanwhile, were just 590k on an annualized basis, well below the 655k forecast and the lowest since April 2020. Moreover, the prior month’s data was revised sharply lower, from 696k to 642k. New home supply actually didn’t rise that much -- from 447k to 457k, and interestingly the median price dropped from 444k to 402k, though the figures are not seasonally-adjusted.

함의: 모든 지표가 쇼크를 기록함.

Reports from consumer-facing companies so far show a gulf between the spending patterns of the affluent and those with less income. The former have been remarkably resilient, signaling there’s support for the US economy, which may ultimately boost equities. The big news came from Walmart -- which leads S&P 500 decliners with an ~8% plunge in early trading -- with a warning that will make retailers nervous, as my colleague Heather Burke writes. But we’ve known for months that both Walmart and Target have been saddled with bloated inventories. Meanwhile, a host of other companies are showing consumers have been willing and able to swallow higher prices, from Unilever to Coca-Cola (with an “absolute blockbuster” quarter) to McDonald’s. Appliance maker Whirlpool said long-term demand fundamentals remained strong. While homebuilders say there’s been a slowdown in demand, home prices continued to climb in May.

함의: 소비재 기업들의 실적을 통해 부유한 소비자와 빈곤한 소비자 간의 격차가 커지고 있다는 것과, 부유한 소비자의 지불용의가격은 충분히 높은 수준에 있다는 것을 알 수 있음.

We had noted in our Q2 earnings preview last week that the season was likely to deliver weak earnings but that this was widely expected, and that low equity positioning going in could see a stronger than usual earnings season rally. The early phase of the earnings season so far has followed this noscript closely. Our measure of aggregate equity positioning has over the last one month edged up from the bottom of its post-GFC band, with positioning for both discretionary and systematic strategies rising modestly. The move up in equities and positioning over the last five weeks has been accompanied by a sharp rally in heavily shorted stocks. Since their very unusual surge in 2020 into early-2021 fizzled out, heavily shorted stocks have over the last 18 months underperformed in a clear down channel, catching back down to the longer-run trend of underperformance, but punctuated by sharp short-lived rallies. The recent rally has again taken shorted stocks from the bottom to the top of the down channel.

보고서: 실적 시즌이 시작되며 예상되었던 부진에 되려 공매도가 가득 쌓였던 주식 위주로 상승하면서 이들의 가격이 하락 추세의 밴드 상단에 위치하게 됨. (Deutsche Bank - Another Short Story)

Macro hedge fund EDL Capital is betting that the euro will plunge to levels not seen since the early days of its inception over 20 years ago, as rampant inflation feeds instability in politics and bond markets that could test the region’s cohesion. That could cause the start of a “euro bear market” in a shift from the current bout of dollar strength that’s weakened the common currency, said Edouard de Langlade, the founder of EDL. He argues Russian gas supply risks will drive up record inflation, forcing aggressive rate hikes at a time of recession and causing Germany to potentially baulk at the costs of keeping the euro zone together. “Europe is on the brink of disaster, which could potentially lead to its breakup,” de Langlade told clients in a letter this month seen by Bloomberg. “We could move to a place where the dollar is not strong against everything but the euro gets weak against everything,” he said, targeting the euro at 80 US cents. The money manager, who runs $751 million at his macro hedge fund, is known for his big and bold bets.

함의: 기록적인 인플레이션과 경기침체가 유럽의 분열을 만들면서 유로화가 모든 통화 대비 약세를 보일 것, 이 때문에 1유로가 80센트의 가치까지 하락하는데 베팅함.

LVMH sales jumped in the second quarter as the owner of Louis Vuitton bags and Dom Perignon Champagne continued to thrive despite lockdowns in China and soaring inflation. Organic revenue in the French company’s key fashion and leather goods unit soared 19%, compared with estimates of a 17% rise, according to analysts surveyed by Bloomberg. In addition to Louis Vuitton, brands such as Fendi, Dior and Celine helped drive the uplift, the company said in a statement Tuesday. The world’s largest seller of luxury goods followed Richemont and Burberry Group Plc in posting results that show the appetite for luxury goods remains even as prices increase, the global economic outlook deteriorates, and China continues to pursue its Covid-zero policy.

함의: 사치재를 소비하는 층은 현재의 거시경제나 정책 변수에 영향받지 않으며, 가격 비탄력적인 강한 수요가 이어짐.

Alphabet beat, with Google's ad revenue — which outperformed — nowhere near as battered as Snap's last week. Microsoft's quarterly revenue missed, held back by the stronger dollar and weaker corporate demand for cloud services and software.