The Busiest Financial Week Of The Summer Is Over

The impact of these last seven days will reverberate over the coming weeks around the deserted halls of Wall Street and Washington DC while politicians and investors retreat to the Hamptons or Martha’s Vineyard or wherever summer. Are we in a recession? It’s hard to say, but hopefully come September the insights we’ve gleaned during this treacherous week will be fully absorbed and our understanding of the US economy will be clearer.

So what are we working with here? Let’s recap.

The Federal Reserve raised interest rates by another 75 basis points. The market expected this move, but it was still a historically significant rally. The Fed’s actions raised the rate that banks charge each other for overnight lending to a range of between 2.25% and 2.50%, the highest since December 2018. Key inflation indicators showed that prices remain elevated. The personal consumption expenditure price index rose 6.8% in June, the biggest 12-month move since January 1982. Consumer spending was higher, which is usually a sign that the economy remains strong. This time, however, the increase is likely due to rising prices, not fattening wallets. Personal consumption expenditure rose 1.1% in the month, above the estimate of 0.9%. The economy contracted for the second consecutive quarter. GDP contracted at an annual rate of 0.9%. This decline marks a key symbolic threshold for the most widely used, though unofficial, definition of a recession as two consecutive quarters of negative economic growth. Americans became more pessimistic about the economy. The Conference Board’s consumer confidence index declined in July for the third month in a row. About 43% of the 3,000 respondents said they believe there is more than a 50% chance the US will enter a recession in the next 12 months, compared to just 13% in April. House price growth slowed for the second consecutive month. Prices in May were still robust, up 19.7% compared to the same month last year, according to the S&P CoreLogic Case-Shiller National Home Price Index. But the market is cooling due to higher mortgage rates and inflation concerns. In April they grew by 20.6%. Congress passed a $280 billion package to bolster the nation’s chip-making industry. The bill will increase production of essential computer chips in the United States to avoid future supply chain problems and increase competition with China. Senators Chuck Schumer and Joe Manchin reached a $700 billion deal on a sweeping climate, tax and healthcare bill. The plan includes $370 billion in energy and climate spending, about $300 billion in deficit reduction, subsidies for Affordable Care Act premiums and tax changes. 170 companies reported second quarter results, incl Microsoft (MSFT), alphabet (GOOG), Metaplatforms (FB), apple (AAPL)i Amazon (AMZN). The results were mixed, with many companies warning of inflation and slowing growth in the future. Still, markets managed to end the week and month higher. That’s a lot to digest. Especially in a very persistent heat wave.

Unfortunately, we have another data-heavy week before we take a break.

Gains continue next week with starbucks (SEX), Uber (UBER) and Airbnb reports.

We also expect the release of some important economic data: the JOLT (Job Openings) unemployment rates and the PMI, a key indicator of US economic activity, are headed our way.

So hold on to the bathing suits and SPF for now. Or not, and bring the beach to your desktop. Holidays are a state of mind right?

Ducati takes on the world

My CNN colleague Jonathan Hawkins recently had the opportunity to meet with Ducati CEO Claudio Domenicali in Misano, Italy, where World Ducati Week attracted approximately 80,000 avid fans and owners over three days.

The Volkswagen-owned company announced on Friday that it posted record revenue of 542 million euros ($552 million) in the first half of 2022 and increased operating profit by 15 percent.

But the Ducati boss described a difficult combination of business conditions that have made it harder to meet increased demand for bikes.

Supply chain issues since the pandemic have been a “complete nightmare,” Domenicali said.

“It’s been a very complicated mix of everything,” he said, noting that the time it takes to get a container from Asia to Europe has doubled, while lockdowns in China have made it difficult to secure the parts needed .

However, he rejected the idea that supply chains should become more localized, pointing to the pitfalls of reversing decades of globalization.

“When you do business for the whole world, you stay more connected,” Domenicali said.

Amid the uncertainty, the company has an advantage. The cheap euro, which fell to parity with the US dollar in July for the first time in two decades, benefits exporters like Ducati by making their products cheaper for overseas customers.

“It’s a help,” Domenicali said, no problem.

And he said the company, one of Italy’s best-known brands, has not been shaken by the collapse of Prime Minister Mario Draghi’s government. Ducati has become accustomed to executing its long-term plans without the government, according to Domenicali.