Investors are focusing on the state of the U.S. consumer and the upcoming Jackson Hole symposium, with retailers warning about consumer health and theft becoming increasingly problematic, while the stock market is benefitting from stabilizing interest rates; meanwhile, disappointing business activity in the EU is supporting the dollar and Treasury yields are declining.
Investors may be underestimating the potential market turbulence resulting from the Federal Reserve's economic symposium at Jackson Hole, Wyoming, leaving them vulnerable to a hawkish surprise from Fed Chair Jerome Powell.
This article does not mention any specific stocks. The author's advice is to rotate out of historically overvalued financial assets and into historically undervalued critical resources. The author's core argument is that there is a high probability of a recession in the next twelve months, and they believe that the Fed's policies will contribute to this recession. The author also highlights potential risks in the junk bond market, the private equity industry, and the banking sector.
Tech-heavy Nasdaq Composite and S&P 500 close higher on Monday, while Dow Jones Industrial Average falls slightly; Bank of America analyst predicts insurers will increase customer prices due to increased climate change risk; Allianz economist believes Federal Reserve Chair Powell will focus on short-term monetary policy at Jackson Hole; Loop Capital warns of weak smartphone sales ahead of iPhone 15 launch; CFRA Research chief investment strategist expects year-end rally for stocks despite recession concerns; Homebuilding stocks begin to decline; AMC Entertainment falls ahead of stock conversion; Cybersecurity company SentinelOne explores potential sale; LPL Financial chief technical strategist says recent stock pullback is temporary and predicts end-of-year rally; Jefferies upgrades gold product manufacturer Acushnet Holdings; Nvidia's quarterly earnings report could be critical for the market, says Wolfe Research; Stocks making big moves midday, including XPeng, Eli Lilly, and Marriott Vacations Worldwide.
Federal Reserve Chair Jerome Powell warned that inflation and economic growth remain too high and interest rates may continue to rise and remain restrictive for longer, while U.S. stocks rebounded and European markets closed slightly higher. Meanwhile, U.S. Trade Representative Katherine Tai highlighted China's dominance in rare earth metals and the vulnerability of U.S. supply chains. Grocery delivery company Instacart filed paperwork for an IPO, and upcoming PCE and jobs data will provide insights into the Fed's rate decisions. Powell's ambiguous remarks at the Jackson Hole symposium led markets to focus on the prospect of a stronger economy rather than interest rate warnings.
Investors are speculating about the likelihood of a recession after recent data showed a decline in job openings, and Key Advisors Wealth Management CEO Eddie Ghabour believes that the market is not prepared for a recession and it could bring about significant volatility. Ghabour highlights factors such as the JOLTS data, earnings season results, and housing market data to support his recession forecast. He also mentions concerns about rising inflation and its impact on the bond market. Ghabour predicts that a recession could lead to a double-digit drop in equity markets and suggests buying the long end of the Treasury curve as a top trade if a recession occurs.
Global equity investors are concerned about central bank policies as U.S. data shows a rise in inflationary pressures, causing markets to worry about a potential end to the Goldilocks scenario and softer labor markets.
Peter Schiff, CEO of Euro Pacific Capital, believes that President Biden's economic policies and the Federal Reserve's interest rate hikes have both failed to address rampant inflation in the US, leading to a bleak outlook for the future with inflation expected to worsen; as a result, Schiff is advocating for investments in gold and energy as hedges against inflation.
Renowned investor Jeremy Grantham warns that the US tech bubble is on the verge of bursting due to inflated stock prices driven by AI hype, with a high chance of a US recession in the next 18 months. He advises caution in investing in US equities, real estate, and commodities, but sees compelling opportunities in climate-change stocks.
