Tech cools, retail rages and some madness

In 2023, the AI proxy, New York Fang, was the most talked about thing. It closed today below the 21-day moving average, by a significant margin that has not been seen since late April. Early 2023 is the inverse of early 2023. Retail has been active in the current squeeze. Goldman's Marshall & team expose the high retail sentiment. Edwards, from Soc Gen, shows that despite the rise in interest rates, net interest payments are down. Edwards has created an impressive chart that explains why the recession is not yet kicking in. He writes: "We've concluded that a significant portion of the huge fixed rate borrowings in 2020/21 are still on company balance sheet as variable rate deposits. The yield curve has been reversed and companies have benefited from higher rates. They added 5% to their profits in the past year, instead of subtracting 10%+. It's not only 'Greedflation,' which has increased US profit margins. Interest rates aren't as effective as they used to be. Source: GS

Only up ...? "....we've watched and waited to see the impact of the liquidity drain that is taking place .....as the rates continue to rise and increase for longer...commercial real estate exposure begins to bite ....and the deposit pricing competition continues .....it's hard to believe that the convenient compartmentalisation regional banking crisis can persist. "We expect the next hike to be 5.25-5.5%, the last in the cycle. On a probabilities-weighted base, however, our Fed views are more hawkish than the market pricing. TME's daily email newsletter is shown above. Here is a link to the article
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