With the benefit of hindsight, July could probably be best described as a #truce in the #bearmarket. The term truce is more relevant in our view than bear market rally or dead cat bounce in as much as the traditional summer recess started really early this year!
True, the "#recessionists" have objectively scored some points with the continuing overall negative inflection of #PMIs and sentiment indicators altogether. But, as we have been writing ever since the solstice more or less, the ongoing market #consolidation STILL pertains a lot more to meaningful downsizing of smart money trades before durably hitting the beach than to a real cyclical game-changer.
Anyway, in this highly specific heatwave recess context, the market segments that performed best in July are virtually ALL the ones that have been the most hammered YTD (US autos 29%, semiconductors +19%, European luxury +12% , ad lib if not ad nauseam...). However, and quite fascinatingly from our own positioning perspective, #oilandgas Exploration and Production #outperformed US Tech (+15% and +11.7% respectively). Is that consistent with mainstream severe cyclical downturn and/or peak inflation narratives?
From a #fixedincome perspective now, our June 14 call to switch back to neutral on bonds altogether (after having been extremely bearish on the whole asset class from November 2021 onwards) is obviously even more vindicated now than it was at the end of June but, precisely, such consolidation is starting to look excessive in our long-standing base #allocation. We therefore recommend to start #underweighting exposure on bonds altogether AGAIN, and this at least until #inflation has OBJECTIVELY peaked, which, by essence, would take us to New Year's Eve... and that is the most optimistic scenario!
But maybe that is the ultimate market paradox at this troubled juncture: being forced to already envision New Year's Eve in an archetypal scorching summer! In other words, markets ‘true direction at this point is ALL a question of perspective...So, in this LIGHT, the most if not only sensible thing to do now is probably still to ENJOY the WAVES, sea or market ones, that is the same in this case; until they last....
Reach out for us around point break!
#AiRLAB #Investmentsheatmap #markets #review #july2022 #returns #performers #thinktank #finetank #staytuned
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