Summer blues

Over the last week market sentiment has radically changed. Markets are back to worrying about a hard landing and a policy mistake by the Fed. Bond markets are now implying a 94% chance of more than 3 rate cuts of 25 bps in 2024. Latest US economic data, namely unemployment data and ISM survey, came in weaker than expected. Amongst the Magnificent 7 stocks, only Meta has shined in this result season. The Yen carry trade is under pressure. Till now, we have no reason to change our overall market view. On the equity side, we are invested into companies with strong moats and solid balance sheets generating solid cash flows and trading at reasonable valuations. On the bond side, we have been arguing for months that inflation is coming down and central banks have arrived too the end of their rate hiking cycle. This morning, TOPIX is down another 7% and equity futures are down again in Europe. It is only a question time till some babies are being thrown out with the bath water and new investment opportunities arise.