Midsummer divergence ?????????

And just like that we're right in the thick of what I consider the three "monuments" of the British summer: Glastonbury, Wimbledon and the British Grand Prix. I'm currently digging out the camping chairs for a trip to the latter which is quite exciting. Fast cars n stuff. Oh, and there's the football too. In fact we're so spoilt for top quality sport right now I hadn't clocked the tour de france had even started never mind the fact that MARK CAVENDISH JUST BROKE THE ALL TIME STAGE RECORD!

And did someone say, election?

I thought I'd try and nip this update out early today before all the inevitable "scenes" later, a lost Linkedin draft earlier this morning (gah) almost stymied that but here we are.

Wow, those midsummer evenings have some energy to them don't they. Love to see it. The first bbq of the year has been had (burgers, halloumi and courgettes before you ask) and the first bottle of rose has been popped. We even managed a breakfast outdoors at the height of last week's heatwave which I consider to be the ultimate summer luxury.

This edition is going to have a bit of a midyear review vibe to it, so with all the energy of a toddler wearing BOTH a tiger t-shirt AND a lion jumper (true story and a philosophy to live by if ever I heard one), let's do this ...

Macro mumbles

UK inflation back at target even if the Taylor Swift effect might keep the Bank of England on hold.

Your global stocks are up about 12% now for the year, over the last few weeks that's really shifted back to being driven by the US. Look at those lines going in different directions since late May.

10 year rates are still wrestling with the longer term path of rates, moving around more or less in the same area they've been in since early May, sovereign bonds returns for the year still don't look great.

Many folks have a feeling that something is “off” - but what ?

Where are things at with the consensus mid-year? We had a good dive into this a couple weeks ago in the team. Four things stood out. Firstly, backdrop is pretty great for stocks but also well priced. Fed about to cut, economies still strong but cooling slightly, stock prices high, what's not to like?

Secondly The "street" is wrestling with potential productivity gains of AI, it's certainly possible to talk yourself into bullish position on stocks if you buy into a productivity story and some do. Even without that bull markets usually run further and longer than this one. Plenty of sensible folks talking about being mid-cycle and with the data to show it.

Thirdly there's positivity on European, Japanese and UK stocks and its mainly about the valuations, no surprises there. but there's a surprising amount of takers for a continuation of US-exceptionalism. Maybe folks got burned too many times trying to aggressively underweight the US on valuation grounds last decade, but drilling down there’s more to it than either a naive continuation of trends or a knee-jerk 180 on prior views: the fact is there’s just a LOT to like about the US economy and stock markets.

Finally, in fixed income there's a bit more of a range of views , depends whether you look at all-in yield (great) or spread (not so great). And whether you can get worried about the US deficit situation affecting markets in short/medium term, some do, some don't.

Perhaps the most obvious observation as we look back mid-year is the surprise in how strong the US economy has been

Datapoints in the US are inching the Fed toward rate cuts which keeps environment supportive. Labour market cooldown remains in place. The major global economies and central banks could be starting to go different ways now with the rate cuts and economic picture and so markets are going to have to figure out what that divergence means.

Things I'm reading

Some of the best of the publicly available Mid year outlooks: Schroders , JPM , Amundi , PIMCO

1. Joe Wiggins identifying the best hands in poker, but all is not what it seems (link )

Joe writes on the back of data from 120 million poker hands which shows that only 5 starting hands are responsible for half of all profits, but as anyone who has played poker knows that doesn't mean what you might think it means as you cannot just wait for a great hand then bet big due to the actions of other players.

There are similarities and differences in investing. In investing the issue isn't so much worrying about other players anticipating your own actions (although you do have to worry about what's priced into the market, which is similar). So can investors wait for that "fat pitch"?

Not so fast says Joe. The issue is we don't really know with clarity what a good hand is (cards aren't fixed and other things are never equal), we probably overestimate the strength of the hands we do have due to behavioural factors, and we probably play too many hands. Other than that we're golden!

2. Ben Carlson asks - is Europe a buy here? [link ] ... and he's not the only one.

Europe is a similar proportion of global GDP to the US but a vastly different share of market cap but of course, there's reasons. At some point it's all in the price. Are we there yet? Is this a genuine "fat pitch" as described by Joe Wiggins?

Two things I'm listening to

1. Professor Jeremy Siegel on The Compound (web |apple )

“The real question is, is this like 1997 (not 1999)” No, we’re not in a bubble - the professor provides pushback on the “Torsten Slok chart”

Pandemic broke relationship between labour and inflation, that's been a big problem for all kinds of macro-forecasting.

Chaser: my former colleagues at LCP sat down for a two-parter with Torsten Slok, one of today's pre-eminent strategists and their episodes on investment uncut are worth a listen (apple | web ). I found that a good listen.

2. Howard Marks with Nicolai Tangen podcast (web | apple )

"Don’t just be contrarian for the sake of going against consensus . Needs to be a deeper thinking process than that . Why is our view different . What does the consensus have wrong , how could this be exposed." Investors should seek to "take the temperature of the market".

“The enemy of knowledge is not ignorance it’s the illusion of knowledge . The fallacious belief that you know , which stops you inquiring “

I do like quoting Howard Marks, can you tell??

Grab bag

Do a podwalk ! It's a thing.

It's UK planning laws that deter investment into the UK says the boss of Eli Lilly

Some thoughts from me on emerging markets . I love the clarity that the low word count you're given for these opeds brings. First draft is always twice the words but barely more value.

the Fed isn't cutting ...

This Roger Federer Dartmouth speech is a wonderful watch and just a real pleasure to listen to with some very deep life lessons thrown in! A recommend.

One of the striking snippets from it which has done all the rounds on social media is this stat that out of 1,500 professional tennis matches Federer won close to 80% of matches, but just 54% of points within those matches. The stats for the stock market being up on any given day vs in any given year are similar. Some important lessons flow from that. Taking each point serious in the moment but then moving straight on. But have a listen as Roger says it best.