MARKETS HAPPY HOUR PODCAST

In today’s Markets Happy Hour podcast we reflect on more bumper earnings from tech stocks, discuss the semi-conductor sector that is making huge strides as demand seems to be totally inelastic and in fact growing, despite price rises. We ask whether it will soon be time to “sell in May and go away”? Starting with inflation it is interesting to reflect on how much sentiment and expectations affect the ultimate outcome – in Japan for example the memory of an extended inflationary era is quite raw, so there even though inflation briefly got over 2% it is already more subdued. The Iran war has had the opposite effect on European inflation expectations which are already heading towards 2.75% for the end of the year, having been lower for some time. In terms of the rising components of inflation food and oil prices continue to be high. The Fed guard will officially change soon but the outgoing Chair, Jerome Powell is staying on as a Governor, which introduces some stability. Expectations have sharply turned around in terms of rate cuts with a minority now expecting rate hikes this year. The fact that the Fed described inflation as “misbehaving” is rue to have struck a chord. Equity markets remain buoyed by solid earnings and certain sectors like semi-conductors in particular which are experiencing a meteoric rise quite similar to pre-1999. Other factors of interest include the weak performance of the Bill Ackman “best ideas” fund and the fact that Ken Griffin thinks that retail investors had a poor understanding of private credit. While this may be true, it is more likely the case that their advisors lost conviction, which raises a more troubling possibility that these investments were not taking place with the right level of portfolio planning.