The Idea of a Pivot is Now Dead

MARKET MOVERS

• The idea of a pivot is now dead. If you read or watched the comments from Jackson Hole, you now know the Fed is serious about raising rates to at least 3% potentially 4%, and leaving it there for at least 12-18 months until inflation is “under control”. You’re better off waiting or buying cyclically defensive stocks. Until unemployment goes up, it’s dangerous to buy anything.
  Read more here.

• European natural gas futures plunged 20%. Benchmark Dutch futures and German power slumped more than 20% on Monday, paring the dizzying rally seen in the past few weeks. The plunge came after Germany said its stores of the fossil fuel are filling up faster than planned. Gas stores in Germany are expected to be 85% full next month, ahead of an October target.

• Hedge funds are rotating into Visa and several health care names in the market turmoil. Data firm InsiderScore looked at the top holdings of “fundamental” hedge funds, those with 10 to 300 positions and aggregate assets of $100 million or more. The firm found stocks that most frequently appear among the largest 10 holdings of these hedge funds. Visa was the standout stock that became well-loved by hedge funds and a few healthcare stocks. Read more here.

• JPMorgan says Apple’s Mac supply has normalized. The firm said lead times have moderated to a week or less across geographies. Mac sales were short of consensus expectations in the company’s second-quarter earnings report. CEO Tim Cook said this was due to supply constraints and the strong dollar.  It means Apple customers now have to wait about five days, on average, for a new Mac, compared to a wait time of about 15 days back in June.

• Bitcoin drops below $20,000 to the lowest level since mid-July. Investors dumped risk assets after the Federal Reserve affirmed its commitment to an aggressive tightening path. The sharp decline in cryptocurrencies coincided with a big sell-off in U.S. stocks, triggered by Fed Chairman Jerome Powell’s stern commitment to halting inflation at Jackson Hole. Read more here.

• Singapore’s Central Bank slams crypto trading. Ravi Menon, the managing director of the Monetary Authority of Singapore, the country’s central bank, on Monday criticized the trading of cryptocurrencies by individual investors. He said cryptocurrencies lacked the fundamental qualities of money and offered no uses outside a blockchain network—except for speculation.
  

WHAT TO WATCH

• Shell CEO warns energy crisis may last more than one winter. The European oil major cautioned that Europe may have to brace for a string of winters with exorbitant power bills and electricity rationing as Russia squeezes gas supplies. He said that it may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, rationing, and a very, very quick buildout of alternatives.

• Honda and LG are set to build a $4.4 billion EV battery plant in the US. The facility will have an annual capacity of about 40 gigawatt-hours with mass production slated to start at the end of 2025, Honda said Monday in a company filing. The duo will set up a joint venture this year in which Honda will hold a 49% stake by investing $1.7 billion. Construction is expected to start by early 2023.

• El-Erian warns of rising volatility as central banks turn more hawkish in the inflation fight. According to the Allianz chief economic advisor, the market has failed to comprehend three different ideas, including that the global economy is slowing at a much faster rate and that other central banks will become more hawkish in the future. Read more here.

• Commodities are poised to rise 38% because markets overestimate the risk of global recession, Goldman says. They see a buying opportunity via a recent soft patch in commodities and reduce risk elsewhere. They see equities threatened by sticky inflation and a potentially hawkish Fed surprise. They think commodities are “the best asset class to own during a late-cycle phase where demand remains above supply.