Infinite Inflows, China’s Tech Crackdown, and Increased OPEC Pricing Power
Record-high equity inflows promise a continued liquidity bonanza for markets, while the oil supply and demand imbalance is likely to grow more acute than what consensus expects.
IN THIS PUBLICATION:
- Global equity inflows in 2021 have been running at 34x the average of the last 25 years.
- The tech crackdown in China exemplifies how the Chinese government will use capitalism and prioritize the well-being of its nation over its capital markets.
- Oil demand might equal oil pumping capabilities by 4Q2022 for the first time ever.
Market's Liquidity Bonanza
- The S&P500 seems to be on holiday in Puglia this August, leaving us, so far, with an average 0.5% daily fluctuation, one of the calmest months on record. Bloomberg calls it boring; we call it European Summer.
- We’re about to close yet another record-breaking earnings season, with 87.3% of the S&P 500 beating earnings estimates as of Aug 6. As we’ve previously reported, these earnings beats are an ever clearer case study of hedonic adaptation – an earnings beat that would usually be rewarded with 0.5% to 1% price increase is now delivering just 0.2% instead.
- Companies have also reported record-high operating margins. We wonder how long this extreme cost-efficiency can continue given the wealth inequality and wealth redistribution narratives that are currently top of mind (increased operating margins may imply slower wage/hiring growth than top-line revenue growth).