Central bakers have very few tools to achieve their mandates around inflation (and in some cases also protecting a currency and aiding GDP growth). Interest rates have a blunt lagged effect and their only other tool is what they say and we need to understand this central banker speak.
Last week it was the South African Reserve Bank MPC rate announcement that left prime unchanged for the first time since November 2021. The vote was close and the governor spent a lot of time saying they had not finished hiking, this was just a pause.
The Federal Reserve FOMC has been saying the same about pausing before more hikes.
But any hikes will surely be data dependent which is what they always say. So the threat of more hikes is central bak speak for don't get too excited.
As expected Local CPI for June came in at 5.4%, lowest in twenty months and well within the 3%-6% target range from the South African Reserve Bank. Yes base effect as June last year was the first +7% inflation print of this cycle.
When do we start talking rate cuts? Truthfully not yet, a pause would be nice eve as the gov always targets 4.5% not the range.
Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla are the magnificent seven. They account for 55% of the index.
A phrase coined in the late 1990s for Microsoft, Intel, Cisco Systems and Dell Computer as they stormed higher in the dot com craze.
All had horrid collapses and took o a decade plus to recover their dot com levels and Cisco and Intel have been modest investments at best with Dell delisting.
Are we seeing the same with the magnificent seven?
Yes, no, maybe.
It is different this time, they all have real tech and make real profits. But have they gone wild on the AI bonanza? Absolutely. Now sure, AI will only get better and all seven have a real chance of be the real leaders in the space (in different ways). But valuations are stretched and this current earnings season is important as are the next few as well.
Two-pot system is confirmed, here all the details