The week in review, second week of July 2023

By Daniel Sobrado

Published in Review

July 15, 2023

2 min read

The week in review

Notable news

News and data that moved the market:

TSMC sales leverage AI demand momentum to beat estimates.
Google’s AI medical chatbot is being tested in hospitals.
Elon Musk’s new AI business, XAI, launches website. Elon Musk says he announces XAI training to understand reality.

Institutionals

The institutional view of the market, what are the big players doing, what are they saying, what are they buying and selling.

Citi downgrades U.S. equities from overweight to neutral.
Citigroup upgrades Europe to overweight.
BofA: “… Since 1980, spikes in 2-year US yields have always been followed by a risk aversion event over the next year or so…“. The full extent of the damage is unknown until the spike in policy tightening is behind us. It is clear that we are not there yet:”
Asset manager and leveraged fund positioning is at its highest point since early 2022. via Deutsche Bank
Goldman Sachs raises Nvidia’s price target, says the chipmaker is entering a new growth phase.
Goldman: Clients ask if the stock will hit a new all-time high this year. The answer is yes…
Morgan Stanley forecasts U.S. and Europe to avoid a recession, but does not forecast gains for U.S. stocks until June 2024.
KeyBanc raises NVIDIA PT to $550 (+30% up), citing that they have secured enough capacity to “quadruple” data center revenues by 2024.
Bank of America: Equity bull market is on track to push the S&P 500 to 5,000 by 2024.
JP Morgan CEO Dimon: Consumers are slowly depleting their cash reserves, underlying inflation has been stubbornly high.
Truist raises Nvidia’s price target to $545 (from $470) and calls it his “highest conviction idea” on Q2 results.
Paul Krugman says a soft landing now looks ‘surprisingly within reach’ after the inflation report.
Blackrock CEO Larry Fink: Inflation will be harder than the market assumes.

The good

Dutch manufacturing production (M/M) May: 1.2% (prev -3.0%) - Manufacturing production (y/y): -9.2% (prev -12.1%).
US CPI y/y (June): 3.0% Expected: 3.1% Expected: 3.1% Previous: 4.0%
U.S. CPI monthly (June): 0.2% (forecast 0.3%, previous 0.1%)
U.S. Core CPI Year-over-Year (June): 4.8% (forecast 5%, previous 5.3%)
U.S. initial jobless claims: 237k (forecast 250k, previous 248k)

Better than expected inflation. El enfriamiento de la inflación estadounidense está acelerando la caída del dólar y los activos de riesgo de todo el mundo se beneficiarán.

The bad

Things that are not looking good.

Chinese exports y/y (June): -12.4% (Forecast -10%, Previous -7.5%)
Chinese imports y/y (June): -6.8% (Forecast -4.1%, Previous -4.5%)
Japanese monthly capacity utilization (May): -6.3% (Forecast -, Previous 3.0%)

China is slowing down.

The ugly

What are the risks?

Falling output… fell 5.4% y-o-y in June 2023, a steeper drop than the previous month’s 4.6% and worse than market forecasts of a 5.0% decline. It was the ninth consecutive month of producer deflation and the fastest drop since December 2015, amid weakening demand and moderating commodity prices.
Post-pandemic savings glut is rapidly depleting At current pace, consumer savings will be exhausted by September 2023 - Game of Trades
S&P 500 earnings are expected to be down 7.2% in the second quarter from last year, but this is due to declines in Technology (-4%), Healthcare (-17%), Materials (-31%) and Energy (-48%). All other sectors should post earnings growth this quarter. - DataTrek

Sluggish global economic development, declining global trade and investment, geopolitical uncertainties and slowing external demand continue to weigh on China’s trade.