A quite macro and micro day saw stocks start off strongly but fade after JPM CEO Jamie Dimon offered his now ubiquitous downbeat view of the foreseeable future.

“I’m cautiously pessimistic. We have the most complicated geopolitical situation that most of us have seen since World War II, if you study history. We don’t really know the full effect of QT. I find it mysterious that, somehow, it had this beneficial effect, but it’s not going to have a negative effect when it goes away. I personally think inflation is a little bigger than people think and that rates may surprise people.”

Stocks were mixed as Nasdaq outperformed (with a big opening bump from Mag7 stocks) but The Dow was the big laggard. S&P fell back to unch and Small Caps ended with a small gain…

After its last second sprint to close above 40,000 on Friday, The Dow just could not hold on…

Mag7 stocks were panic-bid (safe haven?) at the open but faded…

Source: Bloomberg

The story of the day was in ‘alternatives’ though as gold and crypto soared.

The barbarous relic hit a new record high ($2450 Spot)…

Source: Bloomberg

Silver surged back above $32.00 for the first time since 2013…

Source: Bloomberg

The dollar limped modestly higher (with a JPY driven spike intraday)…

Source: Bloomberg

And then early gains in crypto accelerated after Bloomberg’s ETF guru Eric Balchunas upgraded his view of Spot Ether ETF approval to 75% (vote expected this week).

Update: @JSeyff and I are increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing chatter this afternoon that SEC could be doing a 180 on this (increasingly political issue), so now everyone scrambling (like us everyone else assumed they’d be denied). See… https://t.co/gcxgYHz3om

— Eric Balchunas (@EricBalchunas) May 20, 2024

That sent Ethereum soaring back above $3400…

Source: Bloomberg

…and lifted Bitcoin even further, back with pennies of $70,000…

Source: Bloomberg

Treasury yields ended the day higher (but only marginally +1-2bps)…

Source: Bloomberg

As rate-cut expectations drifted hawkishly lower, erasing all the dovish CPI jump…

Source: Bloomberg

Oil prices ended lower on a choppy day…

Source: Bloomberg

Finally, is this the week?

Source: Bloomberg

The vol market is ready for some anxiety…

Source: Bloomberg

But, Goldman is a little worried…Positioning at the US index level is stretched. The Sentiment Indicator (SI) is a measure of aggregate positioning and risk sentiment in the US equity market.

The Sentiment Indicator tracks investor positioning across the more than 80% of the US equity market that is owned by institutional, retail and foreign investors. To calculate the Sentiment Indicator we run a Principal Component Analysis (PCA) on six weekly and three monthly indicators that span these three investor types. Readings of +1.0 or higher have historically signaled stretched equity positioning.

And options markets are pricing the lowest correlation expectation in history….

That’s the real ‘fear’ index and its showing absolutely none right now. Investors are fearless.

By Tsvetana Paraskova of OilPrice.com

New U.S. LNG projects risk delays amid the Biden Administration’s push for lower emissions and the ongoing reviews about the environmental impact of the planned export facilities.

After President Joe Biden halted new LNG project approvals in January for a review of the current permitting process, the U.S. Administration is looking to implement stricter rules on pollution the export facilities are allowed to emit in the community.  

These new requirements are holding back projects, one being Venture Global’s CP2 LNG in Louisiana, and the company’s second such project in Cameron Parish, Louisiana. 

Last week, the Federal Energy Regulatory Commission (FERC) asked Venture Global to provide more details to prove its emissions would be below the stricter threshold.

Venture Global criticized FERC’s move as an “eleventh hour data request” that would “encourage further baseless claims,” the company said in a letter to the regulator seen by the Financial Times.

Venture Global says its project is in line with standards and has filed new information with FERC.

Cheniere Energy, the top U.S. LNG exporter, also has projects that need approvals.

Cheniere is working closely with FERC to progress the permitting approval process for trains 8 and 9 at Corpus Christi, CEO Jack Fusco said on the Q1 earnings call earlier this month.

“We expect to receive our environmental assessment soon and remain confident that we will receive all necessary regulatory approvals to be able to sanction the project in 2025,” Fusco said. 

The halt of new LNG project approvals has been criticized by the U.S. oil and gas industry while environmentalists are pressuring the Administration to reject new project approvals.

“We trust that when the government reviews the climate and environmental justice harms, they will fully reject all LNG export projects, because anything less would reveal this pause to be nothing more than a strategic and self-serving PR campaign,” Candice Fortin, 350.org US Campaign Manager, said.

Charlie Riedl, Executive Director at the Center for LNG (CLNG), responded to the halt in permits saying “This is a short-sighted and damaging action that weakens U.S. relations with our allies. It undermines U.S. energy leadership in the world without any benefit to our shared climate goals and with considerable risk to the U.S. economy by endangering future projects and the jobs associated with them, as well as destabilizing international energy markets.”  

On Monday morning, investors flocked to JPMorgan’s Manhattan campus to hear CEO Jamie Dimon rant about several critical topics. From regulation crushing the US economy to geopolitics, inflation, potential market swoons, and monetary policy, Dimon covered the most critical ones. 

Let’s begin with the topic of stock buybacks. Dimon said, “We’re not going to buy back a lot of stock at these prices.” He was responding to a question about whether stress tests will allow the bank to unleash a new buyback program in the second half of the year. 

“We simply aren’t going to tell you anything anymore about stock buybacks,” Dimon said, adding that he wants to outsmart the hedge funds. 

In markets, JPM shares sank more than 1% after Dimon’s comments. As of 1245 ET, shares were down 2.2%. 

Dimon then commented on credit markets, saying, “Investment-grade credit spread will be dead wrong too,” adding, “It’s just a matter of time.” 

His comments about the credit markets followed a Bloomberg interview last week in which he warned that higher interest rates and possibly stagflation could spark problems in the commercial real estate sector, leveraged firms, and private credit. 

“If you have higher rates and — God forbid — stagflation, you will see stress in real estate and leveraged companies, and private credit,” Dimon said last Thursday. 

Dimon confirmed again, “We’re not going to buy back stock now.” He noted buybacks will come into play when the stock goes back down. 

On regulation, Dimon said, “They make it seem like we’re a hedge fund.” He said regulation is “damaging America at this point.”

He continued on the regulation rant, indicating how overregulation has already forced some customers to exit the banking system. 

Dimon then commented on artificial intelligence, suggesting it will impact almost every job at JPM. 

Back to markets, he expects another market panic someday. Potentially, that’s why he’s saving the dry powder of buybacks for that day. 

On monetary policy, the bank exec said:

“I’m cautiously pessimistic. We have the most complicated geopolitical situation that most of us have seen since World War II, if you study history. We don’t really know the full effect of QT. I find it mysterious that, somehow, it had this beneficial effect, but it’s not going to have a negative effect when it goes away. I personally think inflation is a little bigger than people think and that rates may surprise people.”

On inflation, he said:

“It’s possible that inflation is embedded in the system at 4% for next year & there’s not a damn thing anyone can do about it. That is possible. And I’m not saying it’s going to happen. We don’t make bets in the future, though I don’t believe in central base cases at all. But that is a risk.” 

This is very telling of why Dimon has a slight bearish lean on the outlook. 

As for a succession timetable, he said it’s “well on the way” and “not five years anymore.” 

Dimon’s ominous comments are timely. They emphasize the risks of inflation and the impact of quantitative tightening in a rapidly deteriorating geopolitical landscape as stagflation threats emerge. 

Via Middle East Eye

A Turkish high-altitude, long-endurance drone played a central role in finding the wreckage of the helicopter that was carrying Iranian President Ebrahim Raisi and his delegation on Sunday night.

Iranian search and rescue officials reported late on Sunday evening that they believed the helicopter had made a “hard landing” in Iran’s East Azerbaijan province. However, progress was hindered for several hours due to adverse weather conditions, including dense fog and rain. Turkish Transportation Minister Abdulkadir Uraloglu highlighted another complicating factor: the helicopter either did not have its transponder on or lacked one entirely.

“We track every aerial signal since Iran is part of the area we are responsible for in search-and-rescue operations,” Uraloglu told Turkish media on Monday. “But we couldn’t get any signal at all. It must have been received, but it didn’t happen.” As the search ramped up and proved so tricky, Tehran asked Ankara for assistance.

“Tehran requested a night vision search-and-rescue helicopter and technical help,” a Turkish diplomatic source told Middle East Eye. Subsequently, the Turkish defense ministry announced it had allocated an Akinci high-altitude, long-endurance drone to aid in the search.

Turkish security sources said the defense ministry proposed deploying the Akinci to the area even without an official request from Iranian authorities, who quickly accepted the offer. The sources said the Akinci took off from the armed drone air base in eastern Turkey’s Batman at 11.18 pm.

The Akinci, a model produced by the Turkish drone manufacturer Baykar since 2019, can fly at altitudes of up to 40,000 feet and remain airborne for more than 24 hours, covering vast areas.

“Akinci has capabilities to operate in hard terrain and foggy weather thanks to its high-altitude flight capabilities and thermal technology,” a defense industry source told MEE. “It is a very good match in this sense.”

The drone, which is capable of reaching speeds of up to 400 kmph and efficiently scanning terrain at lower speeds, crossed the Iranian border from the Turkish city of Van, arriving in Iran at 12:45 am on Monday. The defense ministry sources said the drone was able to operate when all other aircraft were grounded because of the bad weather.

As the Akinci commenced its surveillance mission, Turkish public news agency Anadolu launched a live stream on X, formerly known as Twitter, showcasing footage from the drone. The stream attracted 3.1 million viewers at its peak.

At 2:22 am, the Akinci reported its first heat source, instantly sharing the image with Iranian officials. Rescue workers were only able to reach the wreckage at 5.46 am.

Türkiye’s Akinci drone was the most-watched aircraft in the world as it circled Iranian skies, searching for the downed helicopter that was carrying Iranian President Raisi pic.twitter.com/nllPwqEdYK

— TRT World (@trtworld) May 20, 2024

A source familiar with the Akinci operation told MEE that the crash site was close to the area the drone had repeatedly surveyed throughout the night. The coordinates suggested by the Akinci were in close proximity to the crash site, the source added.

As weather conditions improved, the Akinci returned to Turkey, arriving around 6 am. The drone drew a crescent and star over Van Lake on flight radar, symbolizing Turkish capabilities. On Monday, some noted on X that the Akinci’s initial route into Iran through Tabriz appeared to include a flight path over sensitive Iranian military sites, such as the Amand rocket site, Khoi Airport, Tabriz Airport, and the Iranian army’s rapid response base.

Michael Sonnenshein has stepped down from his role as the CEO of Grayscale Investments, the WSJ reported.

“I would like to thank Barry Silbert for his vision and partnership and for entrusting me to lead Grayscale’s business. The crypto asset class is at an important inflection point and this is the right moment for a smooth transition”, Sonnenshein said on his way out.

He will be replaced by Peter Mintzberg – who currently serves as the global head of strategy for Goldman Sachs’s asset and wealth management division – on August 15, according to Barry Silbert, founder and CEO of Digital Currency Group, Grayscale’s parent company.

2/ I want to thank @Sonnenshein– during his 10 years @Grayscale, Michael guided the firm through exponential growth & oversaw its pivotal role in bringing spot bitcoin ETFs to market, leading the way for the broader financial industry. We wish him the best in his future endeavors

— Barry Silbert (@BarrySilbert) May 20, 2024

Silbert recruited Sonnenshein in 2013 to help raise assets for GBTC, which had only $60 million at the time. In the early days, the duo would go on roadshows to pitch the fund to traditional finance professionals only to have the meetings canceled in the wake of negative headlines about bitcoin, Sonnenshein recalled earlier this year.

“There were definitely times when we would have been allocated 45 minutes to a meeting and very quickly into a meeting, we would find we weren’t capturing people’s attention,” he said in a March interview, adding that a “palpable passion for crypto and bitcoin” kept them going despite the setbacks.

His replacement, Mintzberg – whose 20-year ETF-focused Wall Street career spans BlackRock, OppenheimerFunds and Invesco – said that he has “long admired Grayscale’s position as the leading crypto asset management firm, and I am honored to join the most talented and pioneering team in the business. This is an exciting time in Grayscale’s history as it continues to capitalize on the unprecedented momentum in the asset class.”

Mintzberg will take control of Grayscale during a very challenging period: for years, the Grayscale Bitcoin Trust, or GBTC, was one of the few ways for investors to bet on bitcoin in their brokerage accounts without buying the cryptocurrency itself. This privileged position helped the trust, known by its GBTC ticker symbol, amass more than $40 billion in assets under management at its peak in November 2021.

However, in recent months Grayscale’s bitcoin fund has experienced a reversal of fortune, with investors pulling more than $17 billion since it converted into an exchange-traded fund in January. In contrast, nine newly launched bitcoin ETFs from Wall Street asset managers such as BlackRock and Fidelity Investments have attracted more than $30 billion in inflows. The simplest reason for that is that while GBTC charges a 1.5% fee, all other bitcoin ETFs charge next to nothing.

Ironically, Grayscale is largely responsible for the long-awaited regulatory approval of spot bitcoin ETFs – those that hold bitcoin directly, instead of via futures contracts, as previous products did, and in doing so it has seen its own bitcoin holdings shrink by more than half since the launch of the spot bitcoin ETF industry on January 10.

The company sued the SEC in 2022 after the agency rejected its previous bid to turn its bitcoin trust into an ETF. The SEC greenlighted the mass launch of the funds in January after repeatedly rejecting the applications on the basis that the underlying market was susceptible to fraud. When approving the new funds, SEC Chair Gary Gensler said the court ruling in Grayscale’s favor had compelled the change.

While Grayscale’s GBTC is the largest ETF by on-chain Bitcoin investments, currently holding over 287,801 BTC, worth $19.3 billion and holding a 34.9% market share, due to its staggering 1.5% annual fee (compared to the industry standard of 0.20% to 0.25%) it continues to bleed bitcoins daily which get relocated to cheaper alternatives.

In comparison, BlackRock’s iShares ETF (IBIT) is the second-largest, holding over 274,000 BTC, worth $18.4 billion, and having a 33.3% market share, according to Dune. It is only a matter of time before IBIT surpasses GBTC in total holdings.

Sonnenshein previously said that he wasn’t worried about the investor exodus and suggested that GBTC’s fee would come down as the market matures, however judging by the unexpected departure, he was actually worried.

That said, despite the constantly outflows, Grayscale continues to generate robust revenue thanks to a sharp rise in crypto prices and the high fees charged by its bitcoin ETF. In the first quarter, Grayscale generated $156 million in revenue, accounting for more than half of DCG’s $229 million total, according to DCG’s first-quarter investor letter.

Grayscale Chief Financial Officer Edward McGee will lead the company as principal executive officer until August.

Update(1307ET): The same Western officials who cheered on the Hague-based ICC when it issued an arrest warrant for Vladimir Putin are now aghast that it would do the same for US ally Benjamin Netanyahu. 

The Biden administration has condemned the pending formal arrest warrant applications, which also targets Israel’s defense minister, as “outrageous”. Below is the full statement:

BLINKEN on ICC warrants for Netanyahu/Gallant:

The United States fundamentally rejects the announcement today from the Prosecutor of the International Criminal Court (ICC) that he is applying for arrest warrants for senior Israeli officials, together with warrants for Hamas… pic.twitter.com/Z5wPsJaD63

— Jake Sherman (@JakeSherman) May 20, 2024

Perhaps for the sake of a show of ‘balance’ – the ICC prosecutor is also seeking arrest warrants for Hamas top political and military leadership. However, that Israel is being targeted is a history-setting development.

* * *

The International Criminal Court (ICC) has pulled the trigger on issuing its controversial arrest warrant for Israeli Prime Minister Benjamin Netanyahu after months of speculation it may not go through with it amid a Washington pressure campaign. Its chief prosecutor Karim Khan revealed Monday that the world court is seeking arrest warrants for the leaders of Israel who are executing the war in Gaza, also including Defense Minister Yoav Gallant.

Monday’s action marks the first time ever that the Hague-based court has targeted a national leader of a close US ally. Netanyahu is now set to be on the court’s ‘wanted’ list alongside Russian President Vladimir Putin.

The prosecutor said that there were “reasonable grounds to believe Israeli Prime Minister Netanyahu bears criminal responsibility for war crimes, crimes against humanity” and that an application is being filed Monday. The ICC judges are set to review the applications submitted by Khan for the arrest warrants for they formally go into effect.

Kahn further announced that the charges stem from the crimes of “causing extermination, causing starvation as a method of war including the denial of humanitarian relief supplies, deliberately targeting civilians in conflict.”

The ICC is also seeking the arrest warrant of Hamas leader Yahya Sinwar, and Mohammed Deif, leader of the Al-Qassem Brigades, and Ismail Haniyeh, the political leader of Hamas.

As for the three Hamas leaders, they are being sought over the Oct.7 terror attacking, and war crimes including murder, the kidnapping of hostages, as sexual abuse.

“Today we have applied for warrants to the pretrial chamber of the international criminal court in relation to three individuals who are Hamas members,” Kahn announced of the listing Sinwar, Deif and Haniyeh.

Monday’s announcement from the Hague constitutes a huge reputational shock and black eye for Israel on the world stage as it struggles to bat down growing international criticism over the soaring civilian casualties in Gaza. It has increasingly witnessed Global South countries especially turn against it, as the anti-Israel boycott movement also grows internationally.

This also will mean Netanyahu could have trouble traveling to certain countries which are signatories of the Rome Statute, or at least he will have to ‘watch out’ when it comes to visits abroad, even when he eventually exits government office. Last year President Putin avoided traveling to South Africa for an important BRICS conference for precisely this, and to ease the pressure on the government of President Cyril Ramaphosa.

Statement of ICC Prosecutor Karim A.A. Khan KC:

Based on the evidence collected and examined by my Office, I have reasonable grounds to believe that Benjamin NETANYAHU, the Prime Minister of Israel, and Yoav GALLANT, the Minister of Defence of Israel, bear criminal… pic.twitter.com/0FpcRtv8ED

— DD Geopolitics (@DD_Geopolitics) May 20, 2024

Below is the introductory section of Khan’s arrest warrant application for the Israeli leaders:

On the basis of evidence collected and examined by my Office, I have reasonable grounds to believe that Benjamin NETANYAHU, the Prime Minister of Israel, and Yoav GALLANT, the Minister of Defence of Israel, bear criminal responsibility for  the following war crimes and crimes against humanity committed on the territory of the State of Palestine (in the Gaza strip) from at least 8 October 2023:

• Starvation of civilians as a method of warfare as a war crime contrary to article 8(2)(b)(xxv) of the Statute;
• Wilfully causing great suffering, or serious injury to body or health contrary to article 8(2)(a)(iii), or cruel treatment as a war crime contrary to article 8(2)(c)(i);
• Wilful killing contrary to article 8(2)(a)(i), or Murder as a war crime contrary to article 8(2)(c)(i);
• Intentionally directing attacks against a civilian population as a war crime contrary to articles 8(2)(b)(i), or 8(2)(e)(i);
• Extermination and/or murder contrary to articles 7(1)(b) and 7(1)(a), including in the context of deaths caused by starvation, as a crime against humanity;
• Persecution as a crime against humanity contrary to article 7(1)(h);
• Other inhumane acts as crimes against humanity contrary to article 7(1)(k).

Authored by Brayden Lindrea via CoinTelegraph.com,

The fate of spot Ether exchange-traded funds could be decided this week by a single vote from Gary Gensler, the chair of the United States Securities and Exchange Commission — if history is any indication.

In January, the approval of spot Bitcoin ETFs came down to a five-commissioner panel. Two crypto-friendly commissioners, Hester Pierce and Mark Uyeda, voted to approve ETFs, while Commissioners Caroline Crenshaw and Jaime Lizárraga voted against them.

Gensler also voted to approve it, leading many to believe his vote ultimately secured approval of spot Bitcoin ETFs, which were approved with a 3-2 vote on Jan. 10, 2024.

Final SEC Commission votes for the spot Bitcoin ETF. Source: SEC

This week, the same five SEC Commissioners are set to cast their votes to either approve or deny VanEck’s spot Ether ETF on May 23. Here’s what we know about them.

Hester Peirce

Peirce earned the nickname “Crypto Mom” for a reason — she’s bullish on digital assets and wants to see more decentralization integrated into the broader financial system.

She hasn’t confirmed how she’ll vote on the spot Ether ETFs.

However, she’s made herself a part of the Ethereum community, having attended and spoken at ETHDenver in Colorado in late February.

Hester Peirce (left) speaking at ETHDenver. Source: ETHDenver

Peirce has slammed the SEC’s approach to overseeing the cryptocurrency industry in the past, calling some parts of the securities regulator’s approach as “unproductive” and “pointless.”

Caroline Crenshaw

Crenshaw is a strong critic of the cryptocurrency industry and was a strong dissenter in the spot Bitcoin ETF decision.

At the time, Crenshaw said the price of spot Bitcoin ETFs would be impacted by fraud and market manipulation in the broader industry — and by approving the Bitcoin products, the SEC would be failing to protect U.S. investors.

There’s no evidence to suggest that Crenshaw has changed her mind about spot crypto ETFs since then.

Caroline Crenshaw. Source: SEC

“There is little to no systemic oversight of these markets, nor other sufficient mechanisms in place for the detection and deterrence of fraud and manipulation,” Crenshaw said in dissent for the spot Bitcoin ETFs.

“[Spot trading] is fragmented and scattered across different international trading venues, with many markets not subject to meaningful regulation,” she added.

Mark Uyeda

Aside from Peirce, Uyeda has been the only other Commissioner that has called out the SEC for its “regulation by enforcement” approach toward the cryptocurrency industry.

He disagreed with the SEC’s decision to deny a Coinbase petition last December, which accused the agency of behaving arbitrarily and capriciously in its refusal to tailor rules to clarify oversight of the industry.

Uyeda also voted to approve the spot Bitcoin ETFs but expressed “strong concerns” over how the SEC reached its decision.

Mark Uyeda (right) speaking at Milken Institute conference. Source: Eleanor Terrett

He claims the Commission deviated from its “significant market” test used to decide on exchange-traded products and instead approved the spot Bitcoin ETFs under “other means.”

Uyeda described the SEC’s reasoning as “flawed” but cited “independent reasons” behind his decision to vote in favor of the spot Bitcoin ETFs.

However, it isn’t clear what those “independent reasons” are, let alone whether they will apply to spot Ether ETFs too.

Jaime Lizárraga

Lizárraga voted against approving the spot Bitcoin ETFs and was the only Commissioner who didn’t issue a statement following the decision.

However, he reportedly said Bitcoin’s promise as a “viable alternative to traditional finance” and a “genuine financial inclusivity” hadn’t been reached in a speech held at Brooklyn Law School in November 2022.

At the time, he opposed the idea that SEC adopts a “regulation by enforcement” approach toward the cryptocurrency industry.

Jaime Lizárraga. Source: SEC

He also believes most cryptocurrencies are subject to U.S. securities laws, and as a result, are operating illegally.

There’s no evidence to suggest that he’s changed these views since the spot Bitcoin ETFs were approved.

Gary Gensler

While Gensler voted to approve spot Bitcoin ETFs in January, some speculate that he was compelled to do so because Grayscale had won its appeal against the regulator months earlier.

There is no telling whether he will approach the current string of Ether ETF applications in the same way.

Gary Gensler speaking with CNBC about cryptocurrency regulation. Source: CNBC

Earlier this month, Gensler confirmed the SEC’s decision was still under review in a May 7 interview with CNBC:

“That’s something in front of our commission right now. We’re a five-member Commission, and those filings will take up at the appropriate time.”

Gensler has also recently been accused of avoiding answering whether Ether is a security — even when asked by Congress.

Deadlines for the Ether ETF applications before the SEC. Source: James Seyffart

Meanwhile, there are other potential wrinkles in the works. There’s an investigation into Ether’s status as a potential security — led by SEC Division of Enforcement director Gurbir Grewal.

A few fund managers have also claimed the SEC has been less engaging on spot Ether ETFs. A lawyer for one of those applicants, Bitwise, reportedly said a few fund managers are now anticipating an SEC denial this week.

More recently, Nate Geraci, President of The ETF Store, noted it is technically possible the SEC approves the 19b-4 applications (exchange rule changes) but prevents an immediate launch by delaying the S-1 applications (registration statements).

Source: Nate Geraci

Bloomberg ETF analysts Eric Balchunas and James Seyffart predict a 25% chance that at least one spot Ether ETF is approved on May 23 — that figure has fallen from 70% since January.

As we wrap up the first quarter earnings season and approach the midpoint of the year, a major theme emerging out of corporate America and Goldman analysts is the deteriorating financial health of low-income consumers. 

A team of Goldman analysts led by Kate McShane, CFA, published the latest low-income activity dashboard that shows monthly trends have been “mixed recently, noting tailwinds from lower gasoline prices and improved mobility along with headwinds from weaker credit metrics and slowing consumer confidence.” 

Let’s remind readers that Goldman’s top consumer trader, Scott Feiler, recently told clients, “Our desk is getting bearish on consumer and our soft landing basket. We think it’s the most vulnerable area of cyclicality, and cyclicals/defensives are priced very optimistically, and we are starting to see a defensive rotation.” 

In recent weeks, Goldman analysts headed by Bonnie Herzog noted, “With >75% of the US consumer universe having reported Q1 results, we see indications that the US consumer is proving more stretched than previously anticipated as inflation combined with a bit of softening in the macro (lower payrolls & an uptick in unemployment in April), elevated gas prices & high interest rates continue to eat into spending power & consumer confidence.” 

Last week, retail sales data for April missed average estimates. This shows that spending fatigue among the working poor has emerged. Many low-income folks have maxed out credit cards and drained savings to survive the era of failed Bidenomics.  

This year, faltering lower-income consumers is a major theme, and Goldamn’s McShane’s latest commentary on consumer companies shows just that. 

It’s evident that the lower-income consumer is stretched, and persistent inflation, mainly due to President Biden’s $1 trillion spending spree every 100 days, has decimated whatever is left of the middle class. Stagflation threats are elevated. 

By Michael Msika, Bloomberg Markets Live reporter and startegist

The outlook for the economy and corporate profits may be improving, but that’s not enough to make strategists significantly more bullish for the rest of the year.

That’s the takeaway from our monthly survey, which show European stocks have gotten ahead of themselves after gaining about 9% this year. The Stoxx Europe 600 Index will end the year at 503 points, 4% below last Thursday’s close, according to the average prediction in a poll of 14 equity strategists. While the median forecast has risen a little higher to 513, that’s still only the level at which the index was trading earlier this month.

Some strategists have raised their targets from a month ago, including the most bearish ones Bank of America and TFS Derivatives, as well as ING. But none of those is seeing any upside from current levels.

“We remain negative on European equities,” say BofA strategists led by Sebastian Raedler, who hiked their year-end target from 430 to 460 this month, still seeing over 12% downside ahead.

They acknowledge that fading US inflation could support the market in the near term through a dovish repricing in Fed policy expectations. However, the intensification of US labor-market weakness will eventually become the dominant market driver, leading to rising risk premia and fading EPS expectations, they add.

So far, earnings have been stronger than expected. The first-quarter results season has provided positive surprises in Europe, fueling corporate profit upgrades and driving expectations for the markets to keep building the rally.

“The expected sluggish earnings season turned out to be better than feared in aggregate,” say BNP Paribas strategists led by Georges Debbas, pointing out that three-quarters of companies met or exceeded earnings expectations, with even margins improving against all odds.

“Disinflation and other factors could put additional pressure on European margins,” say Citi strategists led by Beata Manthey, with a more upbeat 540 target. “However, this does not change our call for relatively solid European EPS growth of +6% in 2024, which should justify some additional equity upside to year-end.”

What’s more, the divergence in monetary policy relative to the US is likely to serve as a tailwind for the region’s stocks. The European Central Bank has struck a more dovish tone than the Fed over the past few months, and bond markets are expecting the central bank to cut rates before its US counterpart.

That’s keeping investors bullish. According to the BofA European fund managers survey published last week, 78% of participants expect further near-term gains for European equities, up from 52% last month. 51% think European market upside will be driven by a declining discount rate, as fading inflation leads the ECB to ease policy, while 37% are counting on earnings upgrades in response to macro resilience, the survey shows.

“Irrespective of the volatility of US cut expectations, we believe the growth/policy mix in Europe is getting more favorable,” says Barclays strategist Emmanuel Cau, who also has a 540 year-end target for the Stoxx 600. “We see green shoots emerging in the economy, while upcoming ECB/BOE cuts should open up opportunities within the market.”

Apple is offering steep iPhone discounts on several major e-commerce websites in mainland China to boost demand amid declining market share and waning interest as domestic brands make a strong comeback.

The South China Morning Post reports that the top-of-the-line 256-gigabyte iPhone 15 Pro Max model is now selling for 7,949 yuan (US$1,100) on Apple’s official online stores on JD.com and Alibaba Group Holding’s Tmall platform. This is down 2,050 yuan, or 20%, from its original retail price of 9,999 yuan. 

On JD.com and Tmall, the 128GB iPhone 15 model is offered at 4,599 yuan, down from its previous price of 5,999 yuan, or about a 23% discount. According to the two platforms, the sale runs for over a week. 

The sale comes after a report from International Data Corporation showed iPhone shipments plunged by 10% in the first quarter, pressured by slumping sales in China.

According to the IDC, Apple shipped 50.1 million iPhones in the first quarter, down 9.6% from the 55.4 million units shipped in the same quarter one year ago. Compared with other smartphone manufacturers in the report, the Cupertino, California-based company recorded the most significant year-over-year decline since Covid lockdowns disrupted supply chains in China in 2022. 

Since early January, institutional desks Barclays, Piper Sandler, and Jefferies have warned about a downturn in iPhone sales, mainly because of a slowdown in China. 

The competitive landscape in China has intensified since the unveiling of Huawei Technologies’ ‘Made-in-China’ Mate 60 last fall, and, more recently, the ‘Pura 70‘ model. These new offerings from Huawei have challenged Apple’s market dominance and triggered a consumer shift towards domestic brands, further complicating Apple’s position in the world’s largest handset market. 

The bad news for Apple is that the Greater China region represents 19% of all its global sales in 2023. But nothing matters when the company unveils a record-breaking $110 billion buyback. 

The big picture is that Apple faces mounting pressure in China, mainly from Huawei. Also, Beijing’s ban on iPhones from state-run companies and a “wave of patriotic buying” of domestic brands are awful news for Apple.