August has been calm but intense, calm in terms of the market behavior, but under this layer of apparent calm a strong turbulence that we have to monitor is hidden. Not too ago Turkey was criticized because its president dictated what his central bank had to do, with arbitrary decisions forcing types of types of upward inflation. Well, this doubtful merit is about to be matched by Mr. Trump, it will be more elegant will not be as direct as Mr. Erdogan who does not matter directly ordering a decrease in types, he will do it by placing someone from his confidence in Mr. Powell’s chair. At the Jackson Hole Central Banqueros Conference, held every August, Mr. Powell was much more willing to obey and start lowering types at the September meeting. No one escapes that this decision to lower types is political, with an inflation objective still far. In the short term it can generate a euphoria in the markets that begins the decrease cycle, but we must be very attentive to not firing back inflation, in the end the numbers will give and remove reasons, but one of the pillars of the economy is (or it was …) the independence of monetary policy (… or at least it seems …).
The presentation of Nvidia results was a day marked in the calendar, again with strong growth, its sales increased by a +56% year -on -year and its Ebitda in a +62%., Very strong numbers that justify their strong behavior. In general, the business results season has once again been above what has been expected and contributed to having a positive market amid a lot of noise.
In fixed income things are revolts, the types of types are being tension, in the USA we see how the short sections cut their types as a consequence of higher expectations of declines, but the long sections rebuild precisely because an increase of the risk of inflationary rebound is perceived together with the unstoppable increase of their debt levels. This effect is global, in Europe we also see how France has credit problems and its 10 -year type is quoted above that of Spain and point to overcome Italy.
We will have a last intense quarter, we must see how monetary policies evolve and if the business benefits maintain the cruise speed in addition to not seeing inflationary signs on the horizon. Why not any geopolitical surprise? If so, I wish it were positive.
Have we seen the ground in the drop in the dollar? There are voices in that sense (seeing comment from the previous month), in front of the euro the crisis of France can weigh and stop the appreciation of the euro against the dollar, if the crisis of France is aggravated, the recipe of the ECB would be injecting liquidity and buying bonds and possibly declines of more aggressive types to those currently expected, therefore there we would see a definitive high in the appreciation of the euro against the dollar. The Canarian in the mine will come from interest rates, especially to follow the American, French and Japanese.
Jordi Martret
NORZ PATRIMONIA INVESTMENT DIRECTOR