Top Quant Says Markets Priced in a Recession Already.  Here's What to Know.

Top Quant Says Markets Priced in a Recession Already. Here’s What to Know.

75 basis points.

That’s the whole intro.

Phil Rosen here. After yesterday’s Fed hike, I’m breaking down why markets may be able to withstand what happens next.

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Fed Chair Jerome Powell

The Federal Reserve, led by Jerome Powell, raised interest rates earlier this month.

Samuel Corum/Getty Images

1. The Federal Reserve announced a 75-basis-point interest rate hike. It mirrored the previous hike, matched the consensus expectation, and added to concerns that the Fed may put the US economy into a recession.

But even amid the Fed’s aggressive tightening and the weak economic data of late, the worst of the volatility and risk in the stock market has come and gone, according to JPMorgan’s Marko Kolanovic.

In a Wednesday note before the Fed’s latest increase, he explained markets are proving to be less sensitive to mounting recession concerns and have already priced in a downturn.

Plus, recent revisions to earnings show the market is reflecting much of the cyclical weakness, he added.

And earnings reports from Alphabet and Microsoft fit into JPMorgan’s thesis. Shares of the tech giants rose after each showed resilience and strong guidance for the upcoming fiscal year.

“This will be bullish guidance heard around the world and on the Street as the market digests this positive commentary in a darkening macro,” Wedbush’s Dan Ives said, in reference to Microsoft’s results.

In other news:

oil tanker

Photo by ANGELOS TZORTZINIS/AFP via Getty Images

2. US stock futures fall early Thursday, as investors brace for the first reading on US second-quarter GDP, which is due later today. Meanwhile, bitcoin traded above the $23,000 level. Here are the latest market moves.

3. On the docket: Apple Inc., Amazon, and Pfizer Inc., all reporting. Plus, look out for the unemployment insurance weekly claims report, expected from the US Department of Labor this morning.

4. Home prices may be sliding, but these two experts with 35 years of collective experience explain why it’s a great time to get into the market. Not only does the current landscape present an opportunity to buy a property, but it can even allow investors to negotiate on their own terms.

5. The surge in the dollar is slowing global trade and worsening debt crises around the world, the IMF said in a new report. A strengthening greenback means other countries’ dollar-denominated debts are more expensive to service while trade that’s priced in the US currency becomes costlier.

6. Cathie Wood’s funds shed Coinbase shares for the first time in 2022. She sold just over 1.41 million shares of the crypto company, worth about $75 million. Her move comes as the SEC launches a probe into the crypto platform’s business activities.

7. US crude-oil exports hit a record high last week, totaling 4.55 million barrels a day, according to the EIA. The 21% surge comes as the West is scrambling to fill the hole of Russian supply on the global market.

8. A portfolio manager who’s crushing the S&P 500 broke down why renewable energy stocks are poised to defy the bear market. Low costs, strong pricing power, resilient demand, and a structural shift toward clean energy all give the sector promising momentum, the Ecofin manager said. These are his eight top stock picks.

9. Even with the softening housing market, international investors continue to scoop up pricey homes in Florida, California, and Texas. A 2008-style housing crash is unlikely, according to a top analyst at the National Association of Realtors — here are four reasons why.

Meta stock price on July 28

Meta stock price on July 28

Insider Markets

10. Meta reported its first year-on-year revenue decline. Revenue in the second quarter fell almost 1% from a year earlier. Meta also issued a dissapointing third-quarter forecast, citing a “weak advertising demand environment.” Shares in the company dropped more than 4% after hours. It comes as the FTC sued Meta to block it from acquiring virtual-reality company Within Unlimited.

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Curated by Phil Rosen in New York. (Feedback or tips? Email gold tweet @philrosenn).

Edited by Jason Ma in Los Angeles and Hallam Bullock (@hallam_bullock) in London.

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