If the S&P 500 flatlines from current levels through Dec. 31, 2024, the market would still go into the history books as delivering yet another strong year on the basis of an 18.1% year-to-date rise through Monday (July 15). But the best may be yet to come, some Wall Street firms predict.

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* Recent inflation data ‘add somewhat to confidence’ for rate cuts: Powell
* Biden set to call for 5% cap on rent increases
* Wall Street expecting approval of ethereum ETFs
* Demand for safety supports gov’t bonds despite deteriorating gov’t finances
* NY Fed manufacturing activity index continues to decline in July:

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We’ve been here before. Markets price in high odds that the Federal Reserve will soon start cutting interest rates only to learn otherwise. Is this time different? That’s the bet… again.

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* How might Trumponomics influence the US economy?
* China’s economy slows in Q2 to softest annual pace in five quarters
* Higher interest rates take a toll on earnings at big banks
* What’s the source of portfolio alpha? Behavioral risk a key factor
* Kuwait announces discovery of “gigantic oil field”
* US consumer sentiment drops for second month in July to 8-month low:

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● Shocks, Crises, and False Alarms: How to Assess True Macroeconomic Risk
Philipp Carlsson-Szlezak and Paul Swartz
Excerpt via Harvard Business Review
In 2022, when U.S. interest rates climbed, a cascade of emerging-market defaults were predicted—but they didn’t materialize. Also in 2022, and again in 2023, public discourse cast an imminent recession as “inevitable.” Instead a resilient U.S. economy not only defied the doomsayers but delivered strong growth.
For executives and investors such whiplash comes with two types of costs: financial and organizational. Consider the financial cost to automakers that reduced their semiconductor orders in 2020 because they misread the Covid-19 recession as a protracted economic depression. That meant they missed out on sales during the roaring recovery. And leaders can lose the trust of their organizations if they overreact to false alarms with abrupt reversals in strategy, operations, and communications. Clearly, getting the macro call right really matters.

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The spread between the US 10-year Treasury yield vs. a  ‘fair value’ estimate calculated by CapitalSpectator.com narrowed to a three-month low in June. The market-based yield is still well above this fair value estimate, but as expected in recent months (see here, for instance) the excessive market premium is still expected to slide.

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* Futures estimate of first rate cut on Sep. 18 rises to 90%-plus probability
* Rate cuts may be appropriate, says San Francisco Fed president Mary Daly
* Jobless claims in US fell to a 6-week low last week
* US consumer inflation’ 1-year trend falls to 3.0% in June–lowest in over 3 years
* US 10yr Treasury yield drops to 4.22%, lowest close since March:

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The S&P 500 Index closed sharply higher on Wednesday (July 10), rising to yet another record high. Beta risk, in other words, is making more investors look like geniuses this year. The question is whether the increasingly strong ex post returns are borrowing from the ex ante data?

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* Near-zero rates era is “probably over,” says Fed Chairman Powell
* Federal Trade Commission set to sue big pharma over high drug costs
* Gen X retirement crisis looms, new survey suggests
* CFTC chairman reiterates that Bitcoin and Ether are commodities
* Asia stock surge, led by tech stocks rallied including chipmaking giant TSMC
* US stock market (S&P 500) rises sharply, setting yet another record high:

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A month ago it was reasonable to wonder if the worst was over for fixed income securities writ large. Four weeks later, Treasury prices are slightly higher, but the debate continues as investors consider how the Federal Reserve will adjust monetary policy, or not, in the weeks and months ahead.

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