Is the yield curve a flawed recession indicator?
While the deeply inverted yield curve has stoked anxiety among investors about the prospect of a recession, Goldman Sachs has a different message: stop worrying about it. Indeed, the bank's Chief Economist Jan Hatzius just cut his assessment of the probability of a recession to 20% from 25%, following a lower-than-expected inflation report last week.
New bulls entering the EURUSD market
EURUSD has broken through strong resistance that has capped advances all year at 1.1080/90. Last week the push higher saw a close at 1.1245, indicating new bulls entering the market and potential for the currency to enter a new range.
Looking ahead, we should see a support around 1.1090/1.1100. On the upside, we might go back to today's high of 1.1276 and potentially to 1.1590, the 76% Fibonacci line from 2021.
Source: Santander & Bloomberg
The Nasdaq-100's rebalancing in one chart from Goldman
On July 24, the weight of the largest 7 stocks in the index will be reduced from 56% to 44%. Apple and Microsoft will remain the largest constituents but their index weights will be reduced to 12% and 10%, respectively. Alphabet, Amazon and Nvidia come next. Broadcom’s index weight will increase the most (by 60 basis points to 3%). It is estimated that roughly $260 billion in mutual funds and ETFs AUM are benchmarked to the Nasdaq 100 $NDX while hedge funds have an estimated $20 billion of net short exposure. Source: David Kostin thru Oktay Kavrak, CFA
So far, in fiscal year 2023, the US government has a total deficit of $1.393 TRILLION.
In June 2023 alone, the deficit was $228 billion, up from just $88 billion in June 2022. On average, the US deficit has risen by ~$155 billon per MONTH in FY2023. At the current rate, total US debt would rise by $18.5 TRILLION in 10 years. Source: The Kobeissi Letter
Options open interest, iShares 20+ year treasury bond etf
Call Open Interest in the iShares 20+ Year Treasury Bond ETF $TLT is more than triple the OI for Puts signaling that options traders are betting that interest rates are primed to drop. Source: Barchart
Economists polled by German research institute Ifo expect global inflation to avg 7% in 2023, before slightly easing to 6% in 2024.
The avg expectation of 4.9% for the long term until 2026 is still high, Ifo said, though marginally below the 5% estimate in Q1. Lowest level of inflation expectation was recorded in Europe, yet economists do not expect the rate to return to ECB's 2% target by 2026. Source: HolgerZ, Bloomberg
Corn and Wheat are top crops shipped under the deal
Russia ended the agreement that ensured the safe passage of almost 33 million tons of crop exports almost a year into its run, heightening uncertainty over global food supplies. Source: Bloomberg
In China, the unemployment rate among young people ages 16 to 24 was 21.3% in June
A new record.
