Infinite Inflows, China’s Tech Crackdown, and Increased OPEC Pricing Power

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.

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).