Author: Igor Kuchma

China has released its GDP data for the third quarter, showing year-on-year growth of 4.8%. Compared to the U.S. or Canada, the figure seems impressive. However, if we analyze the trend over recent quarters, the picture is less optimistic: growth was 5.4% in the first quarter, 5.2% in the second, and has now fallen again. 

Even so, the CSI 300 has not reacted much: has it become as resilient as the S&P 500?

Not exactly. First, the slowdown was expected. Second, analysts had predicted something worse, around 4.7%. A rebound in industrial production and stronger exports, driven by increased shipments to Southeast Asia and Africa, helped soften the blow, although it is unclear how long that support will last.

As for the key takeaway for investors, the data suggests that China’s economy remains on track. When combined, the figures from January to September show a 5.2% year-on-year growth — meaning the government’s annual target of around 5% still looks well within reach. And that’s the double-edged sword.

On the one hand, it’s cheering that the trade war with the US doesn’t affect China that much yet. On the other hand, stronger-than-expected data could delay the introduction of new stimulus measures — something markets have been waiting for quite a while, and which has been a key factor supporting the CSI 300 index.

So, will the government announce new support measures?

There is still a chance. Although GDP has not disappointed too much, domestic demand remains weak and lags behind overall GDP growth, even though it was supposed to be the main driver of the economy this year. Then there is the troubled real estate sector: house prices fell in September at their fastest rate in 11 months. 

And fixed-asset investment hasn’t been particularly encouraging either. All in all, there seem to be more factors in favor of a new stimulus package than against it. Perhaps some clues will emerge at the upcoming plenary session of the CPC, where Beijing is expected to outline the main lines of its next five-year plan.

Friday brought fresh data on the Fed’s favorite tool for monetary policy decisions — the PCE index, showing a 0.26% month-over-month and 2.74% year-over-year (previously 0.16% m/m and 2.60% y/y) rise in August. Expectations were 0.3% m/m and 2.7% y/y. The S&P 500 and Dow Jones jumped slightly, and the DXY pulled back.

The figure was lower than expected, so why worry?

These forecasts had already been set at the upper end, so there is not much reason for real optimism. It is also worth remembering that the Fed’s target is 2%, but instead of getting closer, the U.S. seems to be moving in the opposite direction so far. And it is not just about a stronger economy, but mostly trade wars.

And those, for now, are only getting hotter. For example, it was announced last week that, starting this Wednesday, the U.S. will impose 100% tariffs on branded pharmaceuticals, 25% on trucks, and up to 50% on furniture. Strikingly, investors don’t seem particularly concerned, and markets keep climbing.

What does the Fed say?

In his speech last week, Powell noted that tariffs are more likely to have a one-off effect on prices than to fuel long-term core inflation. At the same time, he acknowledged that the Fed faces a “difficult situation” in deciding how much and how quickly to cut interest rates, given the risk of renewed inflation.

This concern appears to be shared by the entire FOMC. The president of the Kansas City Fed said monetary policy was “on the right track,” while his counterpart in Chicago warned of the risks of cutting too quickly, and St. Louis pointed out that further easing could make policy overly accommodative.

Still, dissenting voices remain — and interestingly, they are all Trump appointees. Stephen Miran, for instance, is calling for two more half-point cuts before year-end. Michelle Bowman, the Fed’s current vice chair for supervision and a potential future chair candidate, has also taken a more dovish stance.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

The week of central banks hasn’t brought much surprise to investors.

Starting with the Japanese central bank, in line with expectations, it has kept its official interest rate at 0.5%. Still, there was something that initially spooked the markets: the announcement that it would begin selling ETFs worth around ¥330 billion per year, along with real estate funds (J-REITs) worth ¥5 billion.

Later, as Kazuo Ueda mentioned, the bank could resume rate hikes if its economic and inflation forecasts hold, the yen strengthens, and government bond yields rise. If this trend continues, it could trigger capital outflows from U.S. markets to Japan, leading to a correction in the S&P 500, Dow Jones, and other indices.

The Bank of England also kept rates unchanged — at 4%. Although inflation remained high in August, at 3.8% year-on-year, and is expected to rise again in September, policymakers are betting on a gradual decline toward the 2% target. This suggests that rate cuts are unlikely in the short term, supporting the GBP/USD pair.

Finally, the Fed did exactly what the markets had anticipated: cut rates by 25 basis points to between 4.0% and 4.25%, citing emerging tensions in the labor market. The only dissent came from Stephen Miran — appointed under Trump and a Fed member until February 2026 — who advocated for a deeper cut of 50 basis points.

What cheered the mood was that the rate forecasts for 2025 were revised downward from 3.9% to 3.6%, implying at least two more cuts. For 2026, the forecasts were lowered from 3.6% to 3.4%. On top of that, GDP growth forecasts were revised upward: 1.6% for 2025 (up from 1.4%) and 1.8% for 2026 (up from 1.6%).

The only drawback was that inflation expectations for 2026 rising 0.2 points to 2.6%. 

As for why the Fed’s monetary policy outlook is now more dovish despite ongoing pricing pressures: on one hand, the central bank must support full employment; on the other, there may be hopes that the impact of tariffs won’t be short-lived. There’s also a chance the Fed gave in to pressure from Trump.

The latter theory gains weight from the fact that, despite the Fed’s dovish stance, Treasury yields still rose.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

A week ago, there was still a chance that the Fed would keep rates unchanged at its September 17 meeting. The probability was not high, perhaps 10% at best, but it existed. Since Friday, however, that chance has been reduced to zero, shifting the debate to whether the Fed will cut 25 basis points or go straight to 50, for the sake of the S&P 500.

What triggered this change in market expectations was weak labor market data. Instead of the 75,000 jobs expected in August, only 22,000 were created, down from 79,000 in July. As for unemployment, it rose from 4.2% to 4.3%, which is in line with expectations. All in all, the situation is clearly deteriorating.

To make matters worse, June’s figures were revised downward for the second time. Initially, the figure was reduced from 147,000 to 14,000, but now it has been revised again to -13,000, marking the first monthly job loss since the pandemic. How such a drastic revision came about remains a mystery.

This puts the Fed in a difficult position. Powell has been talking up the economy, but reality is undermining his message. Like it or not, the Fed has to act if it wants to stop the bleeding. The thing is, the worsening labor data may have been caused mainly by trade wars, something that lowering interest rates won’t fix.

Ok, the Fed will cut rates in September. But by how much?

The answer could depend on inflation data due out this week. If core CPI falls to around 3%, or even closer to 2%, the odds of a 50 basis point cut could rise significantly. Conversely, if core CPI surprises on the upside, the Fed could opt for a more moderate move, dampening investors’ bullish momentum.

And the latter scenario seems more likely. Consensus forecasts point to a 0.3% monthly increase in the US core CPI, which would keep the annual rate at 3.1%, mainly due to Trump’s tariffs. In that case, the dollar index could strengthen slightly, while Treasury yields could rise slightly, and the S&P 500 could experience a correction.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

Thousands of companies publish quarterly results worldwide, but few attract as much attention as Nvidia (NASDAQ:NVDA). And it’s easy to see why: the chip and GPU giant now accounts for almost 8% of the S&P 500, meaning if it disappoints, the whole market could suffer, and if it exceeds expectations, it can help boost the sentiment.

This time, the results were a mixed bag. On one hand, the numbers look solid: in the second quarter, the company reported record revenue of $46.7 billion, up 56% year-over-year, driven primarily by its AI-focused data center business ($41.1 billion). For comparison, Wall Street was expecting around $46.23 billion.

In terms of earnings per share, the company also exceeded forecasts, coming in at $1.05 compared to the expected $1.00. Net revenue, on the other hand, skyrocketed 59% to an impressive $26.4 billion. However, despite all this, Nvidia shares fell after the report was released and have yet to recover.

The decline wasn’t just because investors had grown accustomed to blockbuster numbers. Instead, it came from the absence of H20 chip sales to China-based customers during Q2. To make matters worse, reports indicate that Chinese authorities have advised local firms to avoid using Nvidia’s H20 chips altogether.

The reaction might have been harsher had Nvidia not simultaneously announced a record $60 billion share buyback program. However, the fact that this was not enough to stem the sell-off suggests that investors seek more clarity on demand trends and export restrictions, especially in the context of trade wars.

So, has Nvidia already peaked?

It seems that clouds are gathering. Beyond geopolitical risks, concerns are growing about valuations in the AI sector. Even Sam Altman has warned of possible over-enthusiasm, and a recent MIT study has revealed that only 5% of companies currently using AI are experiencing revenue growth as a result. 

Meanwhile, competition is intensifying: Alibaba recently launched its own AI chip. Even so, major banks, including JPMorgan, BofA Securities, Citi, and Jefferies, have raised their price targets for Nvidia to over $200 per share, betting that the AI boom will continue regardless of what happens.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

Energy markets have been some of the most sensitive to geopolitical tensions in recent years. In 2022, gas and oil prices skyrocketed after the conflict in Ukraine broke out. Once most of that initial impact had settled, tensions in the Middle East sparked another round of volatility across commodities.

However, the effect proved to be temporary: as nothing has happened, Brent crude is trading below $70 per barrel again. This is good news for central banks, as lower energy prices help combat inflation. It also provides a welcome boost of optimism for stock markets such as the S&P 500 and the Dow Jones.

Is another upward surprise possible?

Perhaps, but only if something serious disrupts supply again. One of the risks in this regard could be Iran. If the nuclear agreement is not reached before the end of August and tougher sanctions are imposed on its oil exports, prices could subsequently see an upside, even without bombs falling on Tehran.

As for Venezuela, on paper, Caracas has the world’s largest oil reserves, but in reality, it barely contributes to global supply. Years of sanctions plus a lack of modern technology mean production is a shadow of what it could be. So even if U.S.–Venezuelan relations sour further, it probably won’t move the needle much.

What about OPEC+?

One might assume that the cartel would be interested in keeping oil prices as high as possible and, with that goal in mind, if they did not cut production, they would at least not increase it. But they did the opposite: +548,000 barrels per day starting in August and another 547,000 barrels per day beginning in September.

In theory, this puts the market in a good spot for oil bears. Unless a major geopolitical crisis disrupts supply from key exporters while global demand holds steady, there’s little reason for oil to climb back to $80 a barrel. But that doesn’t mean the situation can’t change dramatically in the coming weeks or months.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

Last week, the US imposed reciprocal tariffs — ranging from 10% to 41% — on imports from 69 countries and the European Union.  In addition, Donald Trump announced plans to introduce a 100% tariff on imported chips and semiconductors, and an even higher percentage on all pharmaceutical imports.

Now, if exporters were the ones paying, the markets would have no problem. But these are import tariffs, meaning higher costs will fall on households. In fact, consumers already bear about 22% of the expenses related to tariffs in June. Even so, the markets do not seem too concerned about that.

Neither the S&P 500 nor the Nasdaq reacted much to last week’s tariff announcement. One possible reason could be optimism about the president’s so-called TACO initiative, coupled with hopes that, despite everything, the Federal Reserve will continue to lower rates at its September meeting.

However, there could be another long-standing factor supporting the market: corporate buybacks. Since January this year, companies have announced buyback programs worth more than $980 billion, the highest figure since 1982, and this is expected to exceed $1.1 trillion by the end of the year.

The earnings season has also been encouraging. According to FactSet, 90% of S&P 500 companies have reported their Q2 results. Of those, 81% exceeded EPS estimates, above the five-year average of 78% and the ten-year average of 75%. More importantly, companies do not expect a disaster in the near future.

S&P 500 to 7,000?

While analysts continue to find reasons why the market should fall (and, to be fair, there are many), stocks keep surging. The problem is that, without healthy pullbacks, it is difficult to consider this a sustainable trend. Thus, the fall could be much more pronounced when the bad news finally arrives.
The first test will be the CPI report on Tuesday and the PPI report on Thursday. On Friday, Trump will meet with Putin. However, the most anticipated event this month is probably Nvidia’s quarterly earnings report on August 27. If the results disappoint, as in the case of AMD, it could trigger a sell-off across the US market.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

The Federal Reserve held interest rates at 4.25-4.5% at Wednesday’s meeting, as expected. However, for the first time in many years, two of the Fed’s twelve governors — Christopher Waller and Michelle Bowman — voted against the decision, advocating instead for a 25-basis-point cut to Donald Trump’s happiness.

The reasoning hasn’t changed much: the U.S. economy is doing okay overall, whereas inflation risks are still a concern, especially with trade tensions heating up. For instance, the June Personal Consumption Expenditure (PCE) report showed that tariffs are starting to have a bigger impact on consumer prices.

To be more precise, headline inflation increased by 0.3% Month over Month and sped up to 2.6% year over year. Core inflation bounced back, too, hitting 0.3% Month over Month and 2.8% year over year. No wonder doubts emerged about whether the Fed might cut rates in September and wait until October.

By Friday, however, the picture had changed completely following new labor market data: unexpectedly, 258,000 jobs disappeared in May and June, mainly due to uncertainty around tariffs. Markets subsequently reacted, with the dollar index, Treasury yields, and S&P 500 falling and gold prices rising.

So, we have the following picture: inflationary pressures remain due to Trump’s high tariffs, but the labor market seems to be struggling. Against this backdrop, markets are betting on a rate cut in September, but whether that happens will largely depend on upcoming data, especially from the labor market.

In this context, this week’s key events for US markets include the weekly jobless claims report. It is also worth keeping an eye on what Fed officials say — Daly will speak on Wednesday, and Bostic and Musalem will speak on Friday. A shift toward dovish rhetoric will subsequently turn into increased market volatility.

This Wednesday, July 30, the FOMC will announce its decision on the benchmark interest rate. The baseline scenario — anticipated both by the markets (judging by the optimism in the S&P 500) and suggested in recent statements by Fed members including Bostic and Harker — is that rates will remain unchanged at 4.5%.

The reason remains the same as before: inflationary risks from higher tariffs. One might ask why a significant effect has not yet been observed; the answer is that much of the impact of the tariffs is still being absorbed by U.S. companies, which have seen their profit margins shrink. But this will not last forever.

According to the Fed’s Beige Book, which compiles information from business leaders in the central bank’s 12 districts, if import cost pressures remain high in the coming months, there is a growing risk that consumer prices will begin to rise more rapidly in late summer. Already in June, U.S. consumer prices rose.

We cannot necessarily expect a significant change in Powell’s rhetoric at his press conference now that the U.S. has reached a trade deal with Japan and a preliminary agreement with Europe and is expected to announce another delay in tariffs on China (originally set to go into effect on August 12).

Starting with Japan, the agreement remains little more than a handshake. The final terms have yet to be finalized in an official document, and, according to inside sources, legal terms and key details are still being negotiated. There is no clear timetable as to when the promised investments will materialize.

The picture for Europe is even more confusing. Nothing has been formally signed, and the so-called “deal” has already provoked negative reactions within the EU. Several member states and industries argue that it is one-sided — favoring Washington — and that Europe has given too much for too little.

Even if both agreements are finally signed, the tariffs will not disappear. That means that price pressures will remain. Sooner or later, companies will stop absorbing the additional costs and start passing them on to consumers. It is therefore too early to say that inflation risks have finally disappeared…

Since Trump’s second term, trade wars have been among the hottest topics in the US. Last week, the President said he would send letters to more than 150 countries notifying them that their tariffs could be 10% or 15%. The S&P 500 and Nasdaq got nervous momentarily, but then resumed growth.

This resistance to negative news seems to come from the TACO trade — investors bet on a de-escalation after the initial tough talk or tariff threats. As for the concern about a pickup in inflation that the Fed chairman keeps mentioning in every speech, some started questioning whether the risk is overblown.

After all, it has been months since Donald Trump introduced the first round of tariffs this year, and the impact on prices has been relatively mild. In June, headline inflation rose by 0.3% from the previous month, while core inflation rose by only 0.2% (below expectations), which is far from worrying.

Does this mean the Fed was wrong all along?

Not necessarily. According to the Fed’s July Beige Book, some companies refrained from raising prices because customers were becoming more cost-sensitive, which squeezed their profit margins. If these cost pressures persist, we could see consumer prices rise more rapidly in late summer.

With that in mind, it’s possible the full impact of tariffs just hasn’t shown up yet, partly because companies have been absorbing the costs. That’s one reason analysts have lowered their earnings forecasts for the second quarter. If that’s the case, businesses will eventually look to recover those losses.

The bottom line is that as long as tariff uncertainty persists, the Fed is unlikely to rush to cut interest rates, even if the U.S. president continues to push for it. The real problems could come if Donald Trump finally forces Jerome Powell to resign, as monetary policy does not align with his agenda.

Forcing the Fed chairman out could undermine confidence in the central bank and the dollar itself, subsequently triggering a further decline in its value and in U.S. Treasuries. No wonder the Bank of England has asked major banks to stress test their exposure to a potential dollar crisis.

In plain terms, the full impact of tariffs hasn’t hit yet. And the Fed knows it. Its unwillingness to cut rates as quickly as Trump demands suggests a deeper fear: inflation is far from conquered.