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Good morning: Over the weekend, I picked up a copy of the World Economic Forum’s September Insight report. For a broader, global economic report, it tells us largely what we know… before we get to the typical morning analysis, I wanted to share the key takeaways from the report since this tends to be a little surprising from the surveys. We look at the Good, the Bad, and the WTF… WEF The Good
In May, 89% of the surveyed chief economists had expected the global economy to weaken due to the war and rising inflation. But August numbers showed that figure drop to about 45%. Today, a majority of these economists expect conditions to improve or stay the same. The expectation for inflation has cooled… which is very surprising given the fact that diesel prices are back at all-time highs.
One of the positive things about trade is that it finds ways around barriers. Roughly 66% of chief economists expect global trade volumes to increase. About 83% believe that Chinese exports to non-U.S. markets will increase as well. Finally, the expectations is that more and more multi-national companies will continue to invest globally, with the U.S. as the top destination.
Pay attention to the people who know what they’re talking about, not the people in the media who are running with narratives. The survey showed that 97% of chief economists expect that AI adoption will flourish in the year ahead. About 69% expect meaningful positivitiy gains. That’s the story… a boost in productivity in the industries that need it most… manufacturing, healthcare, agriculture and energy. The Bad
The inflationary pressure will increase on the things that matter, according to the surveys. The shares of economists that expect increases… let’s go through each one. 88% say food will increase, 83% say electricity, 77% say transportation, and 71% say fuel and heating. In most regions around the globe, economists expect real household incomes to drop or stagnate. That’s not good news…
Economists aren’t extremely thrilled about the underlying economy. If you watched the Four Doors presentation, you knew that there were four different ways that the world can address its surging debt. The one that raised a lot of flags was the possibility of a balance sheet reset, where valuations move back toward their true intrinsic values. Rather than America growing into its massive balance sheet, prices just retreat to reflect reality right now. Well, 58% of economists flagged that risk of an asset-price correction. Just 25% of those surveyed expected a more resilient economy this year, and geopolitical conflict was the dominant worry for 97% of those surveyed.
Economists expect that politicians will do what is convenient, even at the expense of logical policy. Many expect tax cuts on essential goods and consumption subsidies. They’re effectively helping to boost demand while supply remains constant. These policy actions - short-term as they are - are quick-fix solutions to the ongoing cost-of-living pressures that continue to persist. The problem is that public budgets remain highly strained, meaning the government has less room to pay for the relief citizens need. The WTF
The writing is on the wall for labor. Economists expect that data-center investment will drive growth, as 78% suggested. But 61% of those surveyed don’t see this as a meaningful driver of job growth. This entire buildout isn’t likely to provide a matching jobs program, according to the people watching it closest. The K-shaped recovery continues.
The cost of things that matters continues to rise, and 78% of those surveyed expect that electricity prices keep climbing for consumers. But that’s not the only commodity category. 58% expect higher water prices, and 79% expect pushback due to these costs. The U.S. government is trying to alleviate this with “bring your own power” buildout programs, but we’re now waiting for these bills to enter the Senate committee after a snag last week. The social contract is under pressure due to the AI buildout.
The AI buildout requires massive amounts of electricity. They asked economists where those investments will direct. 83% said to expect an increase in nuclear, 80% said renewables, and 70% said fossil fuels. The last one is surprising given Europe’s hostility to the fossil fuel category. This is positive news for the midstream of the oil-and-gas business. To get it from point A to point B, we’re going to need more storage and shipping Flow Analysis Right now, breadth is sitting at its lowest level since 2000, according to Goldman Sachs. The Nasdaq has been running hot for eight days since short-covering started at the second standard deviation line on the Nasdaq 100 (from the downside). Flows are moving hard from Nvidia into the CPUs that fuel compute. MU should see plenty of action ahead of its earnings report. The thing that could catch a lot of people off-guard heading into the fourth quarter is that desks expect Commodity Trading Advisors to go from sellers to buyers. There are projections that CTAs will need to buy tens of billions over the next months while buybacks return to the market. Mechanical players now swing from a headwind to a tailwind, and options traders are chasing upside. We have the third largest put-call skew decline on record, and deep out of the money call demand is sitting at multi-year highs. There’s a possibility of a melt-up accident. Keep an eye on our signals over at MoneyPrinterPro.com
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