GG: The key has been to tame the bonds. The feat was that they accepted the new fiscal package that promises to increase the deficit by 3.4 billion dollars in the next ten years. What Trump did, or his Treasury secretary, Scott Besent, was deepening what Janet Yellen premiered (and Besent tired of criticizing), skewing the placement of debt to short -term letters.
Q.: The Fed held the rates without changes in its meeting. You said that the important thing, however, was not the Fed but the decision of the treasure around its refinancing strategy.
GG: This quarter you have to place more than a trillion of dollars in treasure papers. It is more than half of the exercise deficit. And Besent fulfilled his promise. The size of long bond emissions will not increase, and the volume and frequency of old emission repurchases will increase. It is the practical way of unhooking the long rates of the tax deficit adventures.
Q.: It’s like disconnecting an alarm.
GG: It is to lower the sound while it is more firewood on the fire. As is.
Q.: Perhaps the collection of tariffs, which grows at full speed and is not involved in the calculations, allows neutralizing the planned fiscal red.
GG: Maybe. But, be careful, because the estimation of the deficit is stretched to 5 trillions if one lifts certain assumptions, very convenient, used to oil the approval of the law in Congress. If certain tax exemptions, instead of being transitory, become permanent, which is usual, the figures shoot.
Q.: In this reality, of Suddenly, we realize that job creation was reduced to a minimum in May and June and rebounded a little in July. And nothing happens? The bag quotes at record levels. He stumbled on Friday and recovered on Monday. That’s it? Was the problem fixed?
GG: Friday’s pineapple was strong. How was it absorbed? The expectation of a rate decline in September was projected to 90%, despite Jay Powell’s sayings a couple of days before.
Q.: Powell sounded very aggressive.
GG: For those who already crave, yes, without a doubt. But what he said is that the data must solve the dilemma. And it is clear that the spill of the tariff rise has already begun to raise inflation rates.
Q.: That the employment is dry and the economy cools ends up being a propeller of the Bull market that already settled at the historical top of its contributions. What if the economy encounters a recession? The rates will surely go down much more. But shouldn’t they drag with them to the bag? A valuation of 22.2 times future profits, how could it be sustained?
GG: If we fall into a recession, the Bull market is a dead man in life. And he will succumb before the recession begins, judging by experience. It is not what the bag has in mind.
Q.: And how to know if he is not a victim of a state of euphoria and does not make a calculation error?
GG: It helps great data. Today the market was depressed a bit with the slowdown of the PMI report published ism. I would take the vision of the Global S&P PMI that confirms what it detected in its preliminary reading of Julio. And, it is exactly the opposite. The strongest expansion of services of the last seven months. Along with greater inflationary pressures, by the way. It is perfectly credible.
Q.: Without a doubt, it is the most convenient vision.
GG: It is more method than circumstantial convenience. What suggests is an acceleration of the economic activity of 1.25% in the first half of a rhythm around 2.5% at the beginning of the third quarter. In line with the best recent financial conditions and the distension that one observes in the variables most beaten by the maelstrom of the beginning of the year such as consumer confidence.
Q.: Is that based on the bag to flame intact and challenging?
GG: No, that I rely on, the stock market, in the middle of the balance sheet, feeds on what companies directly reveal. Profit and guidance over the future. And both lines have been surprisingly constructive. The profits of S&P 500 are already planning a two -digit year -on -year increase in this quarter.
Q.: That is a surprise. They did not reach 5% very recently.
GG: As of June 30, the estimate was 4.9%. Now, with two thirds of the published balances, it is 10.3%. The percentage of companies that informs profits higher than expected (80%), and the magnitude of surprises (8 percentage points), exceeds the averages of the last ten years. And it is not merely a cost cut. The growth of income per share accelerated from 4.2% to the end of June to 6%. It is the highest rhythm since the third quarter of 2022.
Q.: They are not the numbers that one would expect to see in a recession.
GG: It was an air well, not a recession. And forward, if tariff uncertainty is behind, and geopolitical distension is strengthened, it should be better. Although Trump 2.0 is a toxic experience for the long term, it would be sipping a slow poison. Meanwhile, for a parallel lounge, the bonanza of artificial intelligence, and the boom of investments, advance like the bullet train.
Q.: With everything, the “insiders” of the companies, the people from inside, who handles them and better know them, do not demonstrate too much enthusiasm. They are not increasing their positions.
GG: That’s how it is. And it is not accidental. At these prices and with these perspectives, company by company, the stock market seems very expensive. And as you said, macro can ignore everything, but they do know what happens in your companies.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
