“Despite two consecutive quarters of negative growth, it is clear that the US economy is not in a recession, despite investor concerns that have pushed investment in US Treasuries to levels not seen since November 2021.” (Image credits: Adobe Stock -)
Free parking. “Weekly View” by Cesar Pérez Ruiz, Head of Investments and CIO at Pictet Wealth Management.
The strength of the US labor market surprised markets last week with the creation of half a million jobs in July, a number well above expectations. Most of the new jobs were in the service sector, which benefited from the recovery of the economy after the lifting of health restrictions.
Average hourly wages rose 5.2% year over year, while unemployment reached its lowest level since 1969, at 3.5%. In this context, we do not expect any change in the Fed’s monetary policy, as markets now anticipate a 75 basis point rate hike at the September meeting.
Despite two consecutive quarters of negative growth, it is clear that the US economy is not in a recession, even as investor fears have pushed US Treasuries holdings to levels not seen since November 2021. The onset of a recession seems inevitable, but not imminent. our point of view. In the meantime, the US economy should benefit from the inflation-reduction law passed by the Senate on Sunday evening. We will be keeping a close eye on the following figures for producer and consumer price inflation, due for release later this week.
Perhaps the last quarter of strong sales growth
Stock markets held up well last week to a return of interest rate concerns, thanks to the publication of somewhat reassuring results for the second quarter. Strong nominal growth translated into higher-than-expected sales and companies maintained their margins by passing on higher costs to customers.
While 79% of the S&P 500 companies reported a +15% increase in their sales and a +10% increase in their earnings per share, these figures reached +16% and +17% respectively in Europe, thanks to a weaker euro.
We are fairness neutral. This is likely to be the last quarter of strong sales growth as consumers now prefer to look for better prices or limit their purchases rather than accept higher prices.
48% of containers passing through the Taiwan Strait are now blocked
Reminiscent of the 1995 crisis, Chinese military exercises around the Taiwan Strait intensified in response to the visit of US House Speaker Nancy Pelosi. Thus, the Chinese military proves that it can isolate the archipelago from the rest of the world.
With 48% of containers passing through the Taiwan Strait now closed, supply restrictions are likely to worsen if tensions persist. But it should be noted that China, which relies heavily on Taiwan for its semiconductor chips, has set the blockade on 1% of its imports from the island.
Conversely, 42% of Taiwan’s exports are destined for China, with 70% of the products in question related to technology. The current situation is likely to encourage companies to diversify their supply chains further. In addition, global food prices have fallen on a scale not seen since 2008 to their lowest level since January, in the wake of the Russia-Ukrainian agreement on the export of grain stocks.
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