There is anxiety related to public finances and the pressure of Donald Trump on the Fed. On the other hand, expectations for the development of artificial intelligence are still growing. Will fear or euphoria outweigh? We check what was said to Wall Street this week.
Billionaire Ray Dalio: an economic heart attack by excessive debt
– America under the rule of Donald Trump rides towards the autocratic policy known from the 1930s, and other investors are too afraid of the president to speak publicly, “Ray Dalio, a billionaire and former boss of the world Bridgewater Associates, who was the head of the world's largest Hedgewater Associates Hedgewater Hedgewater Hedgewater Hedge Fund.
“I think that what is happening in politics and society is analogous to world events in 1930–1940,” Dalio said.
State interventions in the private sector, such as Trump's decision on the acquisition of 10% of the Intel chip manufacturer shares, the investor calls “strong autocratic leadership resulting from the desire to control the financial and economic situation.”
Dalio claims that many years of high budget deficits and unbalanced increase in debt have led the US economy to the edge of the debt crisis, although he points out that “presidents from both parties” are responsible for the deteriorating situation.
– High expenses, which are currently provided for in the new budget, will probably lead to a heart attack caused by debt in a relatively close future. I would say that in three years, plus minus a year or two – said a veteran from Wall Street.
The head of Deutsche Bank: Bonds are cheaper by political uncertainty
The US debt mentioned by Dalio and the high debt of other countries, in addition to concerns about inflation, a large supply of bonds and a decision of the American Court of Appeal that Donald Trump's duties were illegal, were among the reasons for the sale of tax bonds on the market this week. As a result, profitability increased rapidly, especially papers with a long maturity.
Sale of bonds in recent days is not just a sudden, short -term uprising – believes Christian Sewing, president of Deutsche Bank.
– I don't think it's just a temporary uprising. In fact, this is a reflection of political uncertainty, lack of reforms and growing debt – said the head of the largest German bank in an interview with the Bloomberg agency. In his opinion, increased profitability of bonds will stay longer.
– Of course, risk sensitivity has changed somewhat. And all these discussions about the independence of the central bank do not bring peace to capital markets – added Sewing.
Goldman Sachs: Gold can look at USD 5000
Fears about public finances of countries, the independence of the Fed and the expectations that at the end of September the FED will reduce interest rates are the reasons that led to the increase in gold prices to new record levels.
The attention of metal market participants is attracted by the Goldman Sachs bank's forecasts, according to which the price of gold can fire to nearly 5000 USD if Donald Trump undermines the independence of the Fed. This can harm the status of the American dollar as a global reserve currency, warn the strategists of the investment bank.
“The script in which the Fed's independence is violated would probably lead to higher inflation, lower share prices and bonds, and the erosion of the dollar status as a reserve currency. Gold is a way to store value that does not depend on trust in the institution,” Goldman Sachs argue.
It is enough that only 1% of American tax papers stored in private investors' portfolios would be sold, and the capital directed in gold investments, so that the price of the ore is approaching $ 5,000 – says Goldman Sachs.
Since the beginning of the year, the price of gold has increased by about a third, and this increase was further strengthened by the recent aspirations of Donald Trump to dismiss a member of the board of Fed Lisy Cook. In terms of the rate of return, gold is one of the best raw materials this year.
“That is why gold remains our strongest recommendation in the raw materials sector,” Goldman Sachs wrote in a weekly analysis for customers, cited by Bloomberg.
Morgan Stanley: Fed's cuts are not yet at the price of action
– American actions listed close to historical peaks still have space for growth. The expected reduction of interest rates by the Fed, converging in the still solid profits of companies, favors this – says Mike Wilson, a strategist with Morgan Stanley.
The US economy enters the “early phase” of the business cycle, in which companies' profits grow nominally while a decrease in interest rates – the strategist assesses. He adds that the shares of small capitalization companies, sensitive to foot changes, did worse this year, which gives them room for catching up.
“We do not agree with the statement that interest rate reductions are already calculated in the stock prices. We take into account that the upcoming season of the results may be weak, but we will continue to buy shares in the event of declines,” Wilson wrote in a report for bank clients.
EverCore: AI is more than the internet
The enthusiasm around actions related to artificial intelligence can increase the value of American indexes by another 20% by the end of 2026 – forecast strategies from Evercore ISI.
They set the destination target for the S&P 500 index at the end of next year at 7750 points, i.e. almost 20% above the current quotations. This forecast is argued with the “technological revolution, which is actions, multipliers and the whole society to new heights.”
The EverCore forecast at 7750 points is the highest among the forecasts of Wall Street analysts. The effect of artificial intelligence allowed the profits of companies in the second quarter to achieve profits higher than expectation.
“The second quarter brought a double -digit increase in profits and extensive positive surprises, despite the duties and political uncertainty,” notes Evercore analysts.
However, this year, after four months of growth, American actions even overtook Evercore forecasts. The company's goal for S&P 500 at the end of this year is 6,250 points, i.e. by 4% below the current level of this index.
Optimism on the future and subsequent years in the US markets Evercore bases on the assessment that “artificial intelligence is something bigger than the Internet.”
“In three years, the influence of artificial intelligence will already be felt in all areas of society and industries, even if its use is just beginning to spread,” writes Evercore.
Source: Verslo Žinios
