Market Radar 03. July 2023

Business leaders must take action now – despite high interest rates
U.S. economy with higher-than-expected GDP in the second quarter

On Friday, the Federal Reserve Bank of Atlanta released an updated forecast for U.S. gross domestic product. This so-called GDP Now survey was 2.2%, which forecasts significantly more growth than the majority of US economists had expected from the American economy at the turn of the year 2022 / 2023.

The final forecast for the second quarter, which ended on Friday, is expected in about four weeks, i.e. at the end of July. As a rule, major corrections are no longer to be expected. Even if the official GDP growth figure at the end of July is 1.5% instead of 2.2% for the second quarter, this is unlikely to generate any significant strategic changes of direction among active stock market traders. They are already looking towards the third and fourth quarters. Corrections affecting the second quarter are then waved through as marginal notes.
U.S. consumers continue to buy on credit – despite high interest rates

U.S. consumers don’t really seem to want to cut back, the housing market in the U.S. seems to have bottomed out. Relatively high mortgage rates are accepted if the dream of owning a home is to become a reality. Golden times for real estate buyers are not to be expected in the near future anyway – this real insight has now arrived in people’s minds.

U.S. companies continue to invest – despite high interest rates

U.S. companies are investing right now in optimizing business processes and expanding capacity; perhaps also because company leaders now feel compelled to do so by the rapid advances that artificial intelligence currently promises for users: they have to take action now and cannot afford to wait until interest rates fall. The fear of being left behind by the competition usually occurs when loans are cheap to obtain. However, the latter is currently not the case.
Necessity is not only the mother of invention, it also ignores what distracts from taking action.

Actually, such a scenario – economic growth despite falling inflation and persistently high interest rates – is almost the best of all worlds that a shareholder could wish for. He just has to have the courage to play the trump card. Economists who are not prepared to play this trump card – perhaps because they are waiting for even better data – are perceived to be in the majority in the mainstream of press coverage. Most cling to the cards “inverted yield curve”, “high interest rates”. With such a paper, they play the scenario of “weakening economic dynamics” and accordingly put rather negative outlooks “on the table”; So we prefer to keep the trump card “economic upswing” “in hand” instead of playing it now. 

If there is a boost in productivity and optimization as a result of artificial intelligence – and thus no negative gross domestic product in the US this year or next year – then one could well conclude that the bear market that began in January 2022 and ended in October 2022 – at least on an index basis – anticipated a recession. that never happened.

Such anticipated false expectations are a powerful fuel for rising stock prices.
The result is likely to be a V-shaped recovery on the stock markets – possibly similar to what we saw during the Corona pandemic as a result of the stimulus packages of governments in the charts of the major US stock indices – only now the V-shaped recovery in the charts is likely to be stretched out over time.