We continue to live in interesting times and the United States remains centre stage. It appears to have secured some kind of truce with Iran and while the chances of it holding are open to question, there is no doubting its effect on the price of oil which has fallen more than 25% in short order.
The 4th of July sees the U.S. celebrate the 250th anniversary of its foundation, while simultaneously co-hosting the World Cup. We’ll pass on the importance of Taylor Swift’s nuptials but there is also a new Federal Reserve Chairman, Kevin Warsh. The president is clearly expecting great things from him although, to date, he has made it clear he is looking to restore price stability by getting inflation to target. Trump, as we know, is a ‘low interest rate kind of guy’, so it will be interesting to find out whether Mr Warsh is, too. If he isn’t, it will be much more difficult for the president to criticise him in the same way he criticised Jerome Powell, Warsh’s predecessor. The U.S. currently needs to plug an annual $2T spending deficit whilst shouldering a $40T federal debt burden. With close to a quarter of this requiring refinancing in the next 12 months and almost three quarters within the next 5 years, Mr Warsh certainly has his hands full.
The Mag 7 remain the centre of the investing universe although, perhaps, the first signs are emerging of the market starting to question whether an annual collective investment in AI of $1T can ever reap the economic return worthy of its outlay. To our eyes, this increasingly resembles the TMT mania at the end of the last century. Mark Twain allegedly noted that “history doesn’t repeat itself but it often rhymes”. We believe he just might be on to something.
