Research Summary
The report discusses the global financial crisis of 2023, focusing on the collapse of the super-cycle fraud. It highlights the impact on various risk asset classes, the role of AI trade, and the unsuccessful attempts by the Chinese government to stabilize their markets. The report also discusses the lack of leadership in the stock market and the potential implications of upcoming economic reports.
Key Takeaways
Global Financial Crisis
- End of Super-Cycle Fraud: The year 2023 marked the culmination of the super-cycle fraud, leading to a global financial crisis. Risk assets peaked in July and saw a decline in August.
- Impact on Risk Asset Classes: The crisis affected all risk asset classes, including tech stocks, emerging markets, and junk bonds. The AI trade, except for Nvidia, was significantly impacted.
- Role of AI Trade: Despite Nvidia making a new high post-earnings, the rest of the AI trade was severely affected in August.
China’s Market Stabilization Efforts
- Government Intervention: The Chinese government made extensive efforts to support their markets, including banning short selling and institutions from selling, and even shutting down the market for days. However, these measures proved ineffective.
- Hang Seng’s Bear Market: Despite the government’s efforts, the Hang Seng fell into a bear market.
Stock Market and Economic Indicators
- Lack of Leadership: The report highlights a lack of leadership in the stock market, with tech generals skyrocketing in July and crashing in August.
- Upcoming Economic Reports: Several key economic reports are due before the next FOMC meeting in September, which could potentially reinforce Powell’s hawkish view and impact markets.
- Job Openings: The report mentions a decrease in job openings, which sparked a rally in stocks. However, it suggests that this could be due to more people finding jobs.
Actionable Insights
- Global Deleveraging: The report suggests that the global deleveraging process has begun in China and will soon spread to the rest of the world as panic rate hikes begin to take effect.
- Interest Rate Dynamics: The report implies that economies raising interest rates in panic will not be immune to deleveraging, contrary to popular belief.
- Super Cycle Fraud: The consensus view for 2023 is a soft landing for the super cycle fraud, indicating a need for careful market analysis and strategic planning.
