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Ray Dalio sees the Federal Reserve hiking to 4.5%, so stocks will drop 20%

  
  Analysis

Ray Dalio, founder of Bridgewater on what he sees ahead:

  • “It looks like interest rates will have to rise a lot (toward the higher end of the 4.5% to 6% range)”
  • “This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it.”
  • will in turn see equity prices dropping nearly 20%

Dalio has posted the piece online, you can read the whole thing here. 

Fitch Ratings “deep and wide cuts to global GDP forecasts”

  
Analysis, Economy
  • expects world GDP to grow by 2.4% in 2022 – revised down by 0.5pp since the June GEO – and by just 1.7% in 2023, a cut of 1%
  • eurozone and UK are now expected to enter recession later this year
  • the US will suffer a mild recession in mid-2023
  • “We’ve had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China”
  • The forecast now assumes a full or near complete shut-off of Russian pipeline gas to Europe.

Fitch rating agency revises Australia's outlook to negative (was previoulsy 'stable'), affirms ratin

Stocks recover higher into the close in an up and down day

  
Analysis, US Market

The US major indices recovered into the close and are ending the day higher but was a up and down trading session. The gains come after sharp declines yesterday that saw the Dow, S&P, and NASDAQ at its worst trading day since June 2020.

For the trading week, the Dow industrial average is down -3.14%, the S&P is down -2.98% and the NASDAQ is down -3.24%. However, all 3 indices are above their lows from last week (recall day all moved up 4 consecutive days before yesterday’s sharp fall).

The final numbers are showing:

  • Dow industrial average rose 30.12 points or 0.10% at 31135.08
  • S&P index rose 13.34 points or 0.34% at 3946.02
  • NASDAQ index rose 86.11 points or 0.74% at 11719.69
  • Russell 2000 rose 6.80 points or 0.3% at 1838.46

6 of the 11 sectors of the S&P saw gains while 5 declined:

  • energy rose 2.85%
  • consumer discretionary rose 1.3%
  • utilities rose 0.81%

The laggards today included:

  • real estate which fell -1.39%
  • materials which fell -1.23%
  • financials which fell -0.25%

OPEC stuck to its forecasts for robust global oil demand growth in 2022 and 2023

  
Analysis, Crude

Oil demand will increase by 3.1 million barrels per day bpd in 2022 and by 2.7 million bpd in 2023, unchanged from last month, the Organization of the Petroleum Exporting Countries said in a monthly report. The rise in 2023 will push it past 2019 levels for the first time since the pandemic.

The report also showed OPEC output rose by 618k bpd in August to 29.65 mbpd with Libyan outages ending.

Separately, Saudi Arabia said it boosted output by 236k bpd in August to 11.051mbpd.

  • OPEC … forecasts … robust global oil demand growth in 2022 and 2023
  • citing signs that major economies were faring better than expected despite headwinds such as surging inflation
  • Oil demand (forecasts) unchanged from last month
  • “Oil demand in 2023 is expected to be supported by a still-solid economic performance in major consuming countries, as well as potential improvements in COVID-19 restrictions and reduced geopolitical uncertainties”

—

OPEC are probably right, despite all the ructions seen in markets since the CPI report overall economies are gathering pace. The risk is overzealous central banks plunge everyone into recession, of course.

Blinken calls Iran’s latest response to nuclear deal proposal a ‘step backward’

  
Analysis, Crude

CNN with the update on comments from US Secretary of State Blinken.

  • “What we’ve seen over the last week or so in Iran’s response to the proposal put forward by the European Union is clearly a step backward and makes prospects for an agreement in the near-term, I would say, unlikely,”
  • Blinken said Monday he could not offer a time frame for when he thinks it will be possible to reenter an Iran nuclear deal, saying Iran is either “unwilling or unable to do what is necessary to reach an agreement.”
  • “They continue to try to introduce extraneous issues to the negotiation that make an agreement less likely”
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