Journalist: Armageddon broke out in the Middle East. Iran and Israel Arden on fire. The world wonders about human lives, the instability of the region and its ways of contagion, the oil route and the provision of energy. Of course, Wall Street remains shot from the 6 thousand points of the S&P500. Trump goes suddenly from the G7 meeting, mentions the war and warns that Tehran must be evacuated. And it’s the same as nothing. The non -desensilla bag.
Gordon Gekko: He said that you have to leave Tehran, not the markets. And it is not the first time that an G7 rally abruptly leaves. He also did it in Canada, in 2018, after colliding with the German premier of that time, Angela Merkel, and the homeowner, Justin Trudeau. It is not a meeting that pleases you.
Q.: Maybe if Russia were different. He said it was a mistake to move her away from G7. What was decided in 2014 after Vladimir Putin attached Crimea by force.
GG: Yes. He advocated the inclusion of Russia and China in the G7.
Q.: What do you think about the idea?
GG: The two participate in the G20. That is today the main discussion forum among the leaders of the globe. Not the G7 that reflects a very compact alignment, although no longer decisive to define the course of the world. But, to tell the truth, neither does Trump give much support. The presidency of the G20, this year, plays South Africa. The bilateral relationship is very bad. The US did not participate in most G20 meetings. Trump feels comfortable in bilateral hand, not in a group. It has more Leverangemore “lever” to assert your criteria.
Q.: The first impression is a strong impression. The market does not take away their dream. The war of tariffs in April caused a disruption, and it had to be quickly moderated. The missiles cross the skies of the Middle East and does not happen much. It can continue to be so, and financial life continues without experiencing shocks.
GG: Geopolitics does not arouse great interest in markets. When it does, it is because some extreme event bursts. But later, sooner or later, it tends to be diluted as a focus of attention. And when it is resolved, it leaves the scene, generally, without penalty or glory.
Q.: Isn’t it a mistake?
GG: If it were, it would have already been corrected a long time ago. Do not forget that we come from the Russian invasion of Ukraine, another very serious conflict, and that it still lacks a glimpse of solution. And the markets function as if peace reigned. It fights in the heart of Europe, on the side of the largest nuclear plants in the old continent, and the provision of energy and other materials in Russia was blocked. All this persists since February/March 2022. The January Bear market of that year was not precipitated by Putin but the inflation that escaped the Fed when the Central Bank acknowledged that it was time to deal with. And the Bull market started in October 2022 when the Fed still ran it behind with strong rates. Resilience is not missing.
Q.: It’s complacency, says Jamie Dimon, JP Morgan’s CEO. And I pointed it even before the first missile impact on Tehran.
GG: Resilience fosters the habit of complacency. There is no how to deny it.
Q.: If navigation was clogged by the Ormuz Strait another would be the story.
GG: Sure.
Q.: It is a not negligible risk. But it is also not appreciated that it produces a significant impact.
GG: An extra risk premium of twelve or fourteen dollars over the price of the barrel, which climbed 25% since the beginning of June. If navigation was closed we would have another similar jump, or something else. And a serious headache.
Q.: Let’s leave the Middle East aside. Retail sales fell 0.9% in May in the US. More than expected. It is the second consecutive stumble. And there are three in the last five months. The consumer seems to be in war. Wouldn’t you have to pay more attention?
GG: I also agree. But the sales of the so -called control group – the items that make up the definition of consumption within the national accounts – trap 0.4%. They had fallen 0.1% in April. And the most important thing is that consumer confidence stopped getting worse in May. And for the first time in the year he rebounded in June. By the hand of the taco effect.
P.: Trump’s recoil in the tariff war.
GG: As is. It is not that markets do not know consumer tribulations. They are seeing that their mood sits after an exaggerated pavement stage. It is a key improvement.
Q.: The Fed ends (this Wednesday) its meeting. Interest rates are not expected to move. Do you think you will retouch your speech? The points map, perhaps?
GG: Believe or not, inflation slowed down in the first five months of the year. Despite the tariff crusade and all uncertainty. Powell must communicate it in his speech, although now the possibility of having to deal with an oil shock arises. The Fed will maintain the attitude of seeing and waiting. Everyone will look at the point map. I would be surprised to change your line. The two rates of rates that were scored in March as probable before the end of 2025 will continue to be there. The great novelty should be in the back room of numbers. A reduction in the expected inflation should be recorded. And also a somewhat greater expected weakness of the real economy. What will be read as a favorable wink to the will to resume the rate cuts that Powell executed from September to December 2024. And that could well begin again in September.
Source: Ambito
