The forward multiple for the US market is roughly 19.8x, much higher than historically. Earnings estimates for 2024 imply a +10% increase y/y. ASR’s research evaluated the LTM ramp in valuations, and 100% came from multiple expansion. So, while there is the possibility of beating 2Q23 earnings, which were taken down by analysts, you have to believe in a pretty big ramp going forward unless you think multiples should continue to expand.
The ~$2.8 trn pumped into the economy through fiscal stimulus (via both the Trump and the Biden Administrations, so no politics here) played a major role in our inflation battle over the past two years and forced record tightening by the Fed. If we just experience rolling issues (March regional bank challenges, periodic stock market hiccups, etc.) politicians may decide that throwing money at the problem wasn’t so bad and decide to keep riding that pony in the future when facing new issues. But since we’re not in the same starting point, it would be a big mistake. We’ve got much higher rates and inflation with slower growth on the horizon.
Expectations, per Reuters, are now for July to be the last hike, but pivot expectations are pushed back. So US depositors may get sticky high deposit rates for a bit longer, FT.
Bloomberg notes US political dysfunction, US-China tensions, and deglobalization as reasons to threaten the USD’s dominance. We’d throw in Russia/Iran/name your country tensions with the US as well, so everyone’s started trading commodities in their local currencies, gold, crypto—or whatever they can outside of the USD.
Per CNBC, J&J is suing the US gov over Medicare’s new powers to cut drug prices. People’s creativity knows no bounds (and Internet searches are easy), so it seems that pharma needs to get with the program here in the US and create some pricing solutions.
Reuters reported on ASML’s earnings. Mgmt signaled the chip slump may be in its final innings. Mgmt raised its annual guidance after an order bookings beat, increasing +20% q/q. Even with restrictions, sales in China are solid.
China is focused on its AI computing power to compete with the US and plans to introduce measures to guide the development of the country’s networks and large language models. LG’s AI software Exaone can now analyze images, plus it can learn in both Korean and English.
Sovereign wealth funds. They brought a record $17.2 billion to co-investments in 1H23, up 24% y/y, to help get deals done because of the tighter financing market. Biggies KKR, EQT and Brookfield all befriended the Persian Gulf funds.
China is trying to get away from the narrative that it can only use fiscal policy to drive a recovery for the country.
Yes. EZ auto sales increased in June, marking an 11th consecutive month in growth given demand for EVs. New-car registrations increased by +19% to 1.27 mm vehicles. Sales of battery-electric vehicles popped by +55%.