Bullish Strengthened in US Stock Exchanges and Bitcoin

After the published American inflation data, the markets were almost excited. Nasdaq 100 is at All Time High, S&P 500 is at All Time High. Bitcoin made a serious strong attack from 60000 to 67000. So what happened? What was in the inflation data? In fact, inflation was not that low. Why was the market so happy? What do retail sales along with inflation data tell us? What does the FED say? I will share with you all what will happen in the coming days.

Let's take a look at the data first. Core inflation in America came to 0.3% monthly. The expectation was in this direction, which brought core inflation to 3.6% annually. This is the lowest core inflation since April 2021 and will be even lower next month. The headline was that the market's estimate for inflation would be 0.4. It came to 0.3 and the annual core was 3.4%. Now, there is no such extraordinary drop in numbers here, but the market is enthusiastic. There is another important data coming this week, retail sales. There it came well below expectations. The market was expecting a month-on-month growth of 0.4 in retail sales. Zero came. So this is actually such a recessionary number. The consumer is now truly exhausted. I've been trying to give you this message for a long time. Meanwhile, the Walmart balance sheet is coming.

Walmart is America's largest brick-and-mortar retailer and also a favorite, especially among low-income audiences. In his report, we will probably receive new data about the consumer's weakening. Now you may be thinking this is bad. Yes it's bad but it's also good. As a result, year-over-year retail sales growth was 3.04%. The previous month this was 3.83%. So, on the retail side, we see that the consumer has weakened considerably. Apart from this, there is also a production index called New York Empire State Manufacturing Index. Minus 9.90 was expected, minus 15.6% came. What do we understand when we read all these numbers together?

Of course, the economy in America has slowed down. The high interest rate environment slows down the economy. We are now seeing the repercussions of this on the consumer and producer. Remember, the producer price index was also positive. So it seemed high, but after the correction it was positive. The power of the consumer is broken, the power of the producer is broken. In this case, interest rates will go down and the FED's hand in making interest rates go down is getting stronger. I have been claiming for a long time that Powell wants to lower interest rates. He did not mention raising interest rates in any interview with him. "Our next move will be to reduce it," he said. Now the issue is; Will there be one fall, two falls, three falls?

I believe these numbers indicate three declines. Because there are some other interesting details behind them. Like eating at home, inflation was -0.2 in April. It is below what I expected, I was expecting 0. Eating out remained at 0.3 positive. I was expecting this to drop. The factor that surprises me and makes me look positively to the future is energy commodities. Yes, there is a decrease in energy prices, but those decreases do not coincide with April. Yesterday, I was surprised and looked at the details. The decreases started after April and this is extremely positive for future inflation data. Energy services, on the other hand, decreased rapidly, contrary to my expectations. There are no surprises on the commodity side. Household items have fallen more than I expected.

There is a slight uptick in clothing. I talked to my friends from America yesterday. They say this is a seasonal thing. So there is a season transition. We are moving on to the new season with discounted products. This is the price for it. Otherwise, they say there is no such big increase in price when we encounter the same products as last year. The price decline in new vehicles is worse than I expected. This is obviously not good news for people like me who have investments in Tesla. Apparently, high interest rates hit the market hard here. The price drop in second-hand vehicles is steeper than I expected - it has reached 1.4. Vehicle spare parts -0.1. The level of health products has decreased slightly from 0.6 to 0.4, which is pleasing. There is 0 inflation in entertainment products. 0.1 in education - communication products. These are month-by-month numbers.

0.1 for alcoholic beverages, 0.4 the previous month and -0.1 for other products. So when we look at the core product side, excluding food and energy, there is no inflation. It's only in clothing, it seems seasonal. On the energy side, there is inflation in commodities. But I hope this will come crashing down next month. We have already entered a deflationary environment on the food side. Everything seems to be going better if Americans didn't eat out. But as you know, the real issue is services. Unfortunately, the rent continued to persist, it did not drop by 0.4 this month like last month. Outside accommodation has fallen slightly - 0.2, which is pleasing. The question of the survey "If the homeowner rented out his house" is still 0.4. There is no play here, we weren't expecting it anyway. Home insurance -0.1 had little effect.

There is negative inflation in home business. There is some positive in water and garbage. Medical care was higher the previous month. It was 0.6 month by month, but it dropped to 0.4. It's pleasing, but as you know, the real issue is transportation services. When we exclude vehicle insurance from transportation services, inflation, which was 0.9 last month, decreased to 0.6. But the main issue is of course vehicle insurance. It decreased from 2.7 to 1.8. In fact, it is the main reason for the decrease in inflation this month. Because remember, the energy exceeded our expectations. However, we need to save money somewhere. The decline we expected has occurred in vehicle insurance, which has a high multiplier, that is, a high place in the inflation index. I predict that the decline will continue next month. I guess we will go down to around 1.5%. Entertainment services 0.3, education and communication 0.2, other personal services, there are many subcategories within this, but the total is of little importance. There was a bit of high inflation there. The decline continued in almost all inflation items.

We have a negative surprise in energy. So will that negative surprise continue next month? No, it won't continue. Because when you look at it, the price of Brent oil has decreased rapidly in the last month. The price of oil, which was in the 90s on average in April, is now in the middle of the 83.7th month. So it's been going low since the beginning of the month. If it continues to protect itself in this way, inflation in oil, the largest energy commodity, will be negative compared to last month. Let's not think that he will write this down again. Let's even say it could be a little bit positive again. Because the energy commodity does not only consist of oil, and let's give a number like 0.5 and see how the headline inflation is affected by this. When we multiplied it became 0.24. So we suddenly reach the 2% level. Remember, when it is below 0.25, it is considered 2% monthly inflation. Of course, the kernel is not directly affected by this. Because there is no energy in the nucleus, but it will be affected indirectly. Because it is reflected in some places, such as transportation costs within the core.

So next month, if normalization returns to energy commodities alone, 0.5, which will actually probably be negative. But for example, if we say 0, we come to an inflation rate of 0.22. On top of that, if there is another decrease in the vehicle insurance section of transportation services next month, I will be a little modest, I will say 1.5, I will not exaggerate here. Headline inflation seems to be coming down, but core inflation is not. Because there is still a problem with rents, which is the main issue that will affect the core. But even if the core inflation is like this next month, that is, all items remained the same, the oil price did not increase, on top of that, inflation in car insurance slowed down, rents did not change, there was no decrease in any of the other items, so we can expect decreases, in fact, the consumer is stuck in many of them.

In this case, next month's core inflation is 0.32. But interestingly, even if it feels like this, annual inflation continues to fall at the core. Because the base effect, last year May inflation was 0.36 in the core, if it reaches 0.30 in May this year, there will be a 6 basis point decrease reflected in the annual. This will push the annual core backwards. I expect an even sharper decline in core inflation in May. The reason is that the consumer in America is stuck. I say it again and again. When we look at July, the probability of interest rate cuts has reached 32.5% + 2.4% = 35%. We still see that the market is pricing in a rate of 65.1% that there will be no interest rate cut, and the interesting thing is that this is still close to last week's averages.

The market is not convinced, the FED says it will not cut interest rates. I don't know why they are not convinced. The articles I have seen do not say this. These are actually also good earning opportunities. Because if you see something that the market cannot see and you are right, you will make money. Of course, it could also be the other way around. When we look at September, the probability of the interest rate not going down is now decreasing, down to 27.4%. There is a 75% probability that a discount is expected on that date. There is also a slight climb here compared to a week ago. So the market has acted quite conservatively. The probability of not reducing the interest rate has increased from 33.6% to 27.4%, even slightly compared to yesterday. I guess the FED members made statements. When we look at November, the probability that interest rates will not decrease decreases to 15.7%. When we look at December, it decreases to 6.2%.

So, everyone is sure that there will be an interest rate cut this year. Now there is a struggle for when it will start. I say it starts in July. Some say different things. So how does it reflect on debts? As I just mentioned, this week the Nasdaq 100 made an All Time High, it is at an all time high, and so is the S&P 500. I don't expect to go straight up from here. Because recession is coming? I predict that concerns about whether the FED will be late will be brought to the agenda from time to time and that we will go downhill. But I believe that interest rate cuts may not decrease at the expected rate, at least in terms of creating expectations, but many things can be managed with expectations. I think it will be good for the market. My year-end target for Nasdaq 100 is 22000 dollars, and for S&P 500 it is 6200. It is useful to be a little careful when talking about the year-end target. Because things may change depending on the election results. But at least my current expectation is to continue rising.

Here, of course, we also see the electoral economy that will gradually come into play. We started to see the first signs of this this week. For example, Biden imposed very serious taxes on the import of certain products from China. This is actually a game aimed entirely at internal voters. He says we are increasing domestic production. It may also have a slightly inflationary effect. Because putting tariffs on Chinese products means producing more expensive products domestically. But its impact is relatively small, it started with little shows like this. Regarding this, I think that there will be some loosening measures on the treasury side of the state other than the Central Bank, and when relaxation comes, that is, when money becomes abundant, when we look at the relationship between the money supply in America, the money supply we call m2 supply, and the S&P 500 index, when the money starts to be restricted, the S&P 500 moves downwards. going.

When money is loosened, S&P 500 goes up. It generally runs a little further ahead, and we see that the monetary tightening has ended recently. It even turned slightly upward. For the reasons I have just explained, I think the currency will loosen again as the consumer starts to be upset. This often reflects positively on stocks. This will reflect positively not only on stocks but also on gold. It reflects positively on all commodities, it reflects positively on bitcoin, it may reflect well on certain altcoins. But we shouldn't think about it all together. There will be more serious increases in certain stocks and certain categories, but not all of them will rise. We have already seen this this week. While certain stocks, certain categories rose rapidly, others did not.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.

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