In today’s briefing:
- Fed Sees Economy Cooling as Leading Indicators Also Suggest Softer Looming Trend
- Tops Are Processes
- Copper Tracker July 2024: Physical/Equity Screens And Trades
- How Politics Is Intruding on Fed Policy
- Japan: Is the Balance Sheet Recession Over?
- Crop Prices Plunge as Favorable US Weather Accelerates Planting, Growth, & Harvesting
Fed Sees Economy Cooling as Leading Indicators Also Suggest Softer Looming Trend
- Consumer confidence measures have been generally weaker in H1, thereby suggesting a major improvement in underlying spending trends is unlikely in the near-term.
- House price inflation has moderated due to lower demand, while banks have not loosened lending standards across all categories of mortgage loans.
- Recently released minutes of the latest FOMC meeting indicate that members expect the economy and inflation to cool, but they are in no hurry to lower the federal funds rate.
Tops Are Processes
- Numerous warnings about a toppy market have been appearing , but they tend to be “this will not end well” warnings with no obvious bearish trigger.
- Long-Term risks to equity prices are rising, but short-term price momentum is strong.
- We believe that your decision to be bullish or bearish will depend on your time horizon.
Copper Tracker July 2024: Physical/Equity Screens And Trades
- Copper rebounded last week, rising 4% on the LME and 6% on the COMEX, led by improved sentiment but in line with most of its commodity complex peers.
- Check out our initiation, Copper Primer: What We Like About Copper and What to Play, and our equity initiation, Southern Copper: In a League of Its Own.
- We provide updates on the long copper-short gold trade we explored last week and the iron condor in Freeport Mcmoran (FCX US)
How Politics Is Intruding on Fed Policy
- Recent economic data is signaling a trend of growth deceleration, which raises the odds of a September rate cut.
- Political considerations may derail a September easing decision as Powell may not achieve a unanimous vote, which would open the Fed to charges of interference in the electoral process.
- The Supreme Court’s recent repudiation of the Chevron decision also opens the door to constraining future Fed policy to stabilize the financial system in the event of a crisis.
Japan: Is the Balance Sheet Recession Over?
- Japan has suffered from a balance sheet recession, triggered by a sharp decline in asset value, since the 1990s.
- As the Nikkei treads new height, it raises the question of whther the balance sheet recession is over.
- Though some of the structural challenges remain, the balance sheet recession has improved in recent years.
Crop Prices Plunge as Favorable US Weather Accelerates Planting, Growth, & Harvesting
- Corn and Wheat planted acreage are down 3% and 5% YoY, respectively. Meanwhile, Soybean total planted area is up by 5% YoY compared to 2023.
- Planted acreage and ending stocks drove prices down for wheat and corn. Soybeans bucked the trend as reported acreage fell short of WASDE estimates by 400k acres.
- A positive picture for 2024 planting season is visible, with the early benefits of warm temperatures and improved moisture levels setting the stage for strong yields.
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