Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1. Looking forward to Q4 & 2026
Look what Mike Wilson of Morgan Stanley said on Tuesday, July 15 on CNBC:
- “Trump came in like a new CEO; .. they kitchen-sinked things… they did all the growth-negative things first; …”
- “one of our themes was that AI Capex was going to slow down or decelerate and all that troughed in April… & that explains a lot of the sell-off; … people are focused on tariffs, focused on other things … but the AI-Capex cycle has been very important for the overall market direction – 1st down in Q1 & then the recovery in Q2 ;”
- “.. the market has moved on from tariffs; the worst is behind us; .. we don’t have bad news or issues ahead of us …. “
- “… the Big Beautiful Bill is a part of that positive transition now to real earnings growth more so that economic growth; the market understands this … earnings revision breadth has turned straight up .. we have been talking about this for 3 months and the Big Beautiful Bill only supports that view; companies manage these earnings; so I am very confident they will beat by 4%-5%;”
- “financials don’t have any tariffs, right; its going to be the consumer goods space & these companies tend to report in the back 1/2 of the earnings season;.. So I think August is going to be the period when we are going to have some sort of corrective activity around earnings… but that’s a pause; “
- “my view is earnings are going to accelerate in the 4th quarter into 2026“
Getting back to tariffs, Wilson said:
- “my view has been personally favorable … at the end of the day, if we can collect 10% tax on all imports, that’s $400 billion a year; that’s real revenue; … we can live with this; its a shared tax across those 3 constituents; …. business will figure it out …. “
The next morning, Mohammed El-Erian delivered a clear & unambiguous message on CNBC:
- “… I think they should be cutting this month, but I don’t think they will …. I have never been as excited about productivity as I am now; … speed limit for the economy is going to go up … “
In a comment that struck us, CNBC’s Carl Quintannia used the phrase “wrestle with productivity” about the message of El-Erian, instead of the better term “embrace productivity“? Revealing?
A day later Mike Wilson said the following on Bloomberg:
- “we were severely tested; we had a bear market; we bottomed in April & all the indicators we look at, from a rate of change standpoint, have inflected sharply; … it even surprised us to the upside; the earnings revision breadth is explosive & you just can’t deny that… “
- “you can’t deny the fact that companies are good at mitigating tariffs; … prices aren’t really up that much; …. 3rd quarter is probably the quarter of risk; … I don’t think it is a massive correction – 5%-7% correction … “
- “I am hoping we get a pull-back … a lot of clients are looking for a pull-back of some kind; … may be there will be another test of some kind that will cause something more severe … but I can’t see more than a 5%-10% correction given what I see now in the landscape‘”
Then his finale:
- “… this is what the beginning of a new bull market looks like… its explosive, it doesn’t let people in; the rate of change is accelerating beyond what you expected… so pullback will be short & shallow“
The above was about public markets. Are private markets a different game? Below is a prognosis from an old equity analyst turned private equity investor.
KKR’s Henry McVey on Bloomberg Surveillance on Friday, July 18 (minute 40:04 to minute 46:47):
- “… what we have seen over the years is that the quality of S&P has actually improved; first corporate taxes went from 31% to 21%; there is more cash flow; second is that the index has moved more towards service companies that have a higher return of capital & have higher margins; …”
- “our view is the cycle will go on; this is like the 90s & 60s where you have a productivity-driven cycle; they last longer; 2022 is like 1994 when the bond market sold off; people moved to the sidelines; you really wanted to buy the 1995 & then it ran another 5 years; we think that is pretty similar; “
- “productivity-driven cycles – they act differently … we have seen this in one or two different decades; … when COVID hit what they did is focused on automation & that spending is yielding really good results.. I don’t think we have actually had the AI boom flow through the data yet ; that could be a little more addition to the productivity-driven cycle we have seen… most CEOs today are, for competitive reasons, investing in technology … they are squeezing more out of their business & cash flow”
- “… over time it is all about productivity; every year we continue to focus on that … our “Glass still half full” thinking is that attractive financial conditions – a global easing cycle and ongoing productivity gains .. will continue to drive this cycle further & longer than many think“
2. Looking into August
- Subu Trade@SubuTrade – The S&P has been above its 20 day moving average for 59 straight days. Pullback next week? ⬇️
And,
- Thomas Thornton@TommyThornton – Nasdaq 100 futures and Nasdaq Composite with new DeMark sell Countdown 13 exhaustion signals
Divergence!
- Seth Golden@SethCL – NASTY divergence may signal near-term and greater consolidation; Majority of $NDX stocks trade below 20-DMA (51%); Last pullback in the index tested perfectly 20-DMA; Every divergence has delivered price consolidation (shaded), but from what level indeterminable; $QQQ $SPX $COMPQ $TQQQ $NVDA $MSFT $SMH
On the other hand,
- Bespoke@bespokeinvest – The MSCI China ETF $MCHI saw a nice breakout above multi-month resistance yesterday:
3. Looking Backwards to April 2025
As we saw above from Mike Wilson, Henry McVey & as we hear every hour on Fin TV,
- “the stock market is looking at what happened in April & saying it was a scare. It was an over-reaction. It was a nothing deal. It was one-off at the most“
In stark contrast, a very important market looks at what happened in April & says,
- “there was a lot of serious stuff that happened which confirmed .. the fragility, a fragility driven by concerns over the macroeconomy”.
This interest swaps market has gone in a “completely contrary direction, this past week coming within a small amount of hitting new record negative lows“. This shows how intensely the market is betting against Jay Powell’s inflation view. In a bit more detail,
- “ … swaps are already pricing that interest rates are going to go a lot lower & then stay there a lot longer … a sign that the Fed doesn’t know what inflation is or where it comes from and the market knows this & believes the policymakers are insane in chasing inflation ghosts that aren’t really real …. the more negative the swap spread, the more this critical market is betting directly against J. Powell and the FOMC & its inflation narrative“.
The charts of the 5-year, 10-year & 30-yr swap spreads are really worth a look in the 18-minute “We Haven’t Seen a Divergence Like This Since the Financial Crisis“.
Dr. Lacy Hunt, a stellar economist & Executive Vice President of Hoisington Investment Management Company, said, in a discussion on reported profits over expectations & hard numbers used by companies in tax filings,
- “the bea (Bureau for Economic Analysis of Corporate Profits) is saying that there was a very significant fall in profits in the 1st quarter, more than $100 billion“.
In his 12-minute clip titled “The Economy Is Far Worse Than You Think…“, Dr. Hunt says on more than one occasion that the “Fed’s monetary policy is too restrictive“.
Will they turn it to accommodative or even loose?
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