The balance sheet of financial assets for the last 6 months of the year is now in front of everyone. Adjacent to it is the table that contains the values and variations of the data that I looked at, compared to the end of last year.
➔ This 6-month chart tells us that abundant and cheap global money is starting to drain. Just as the same abundant and cheap money led to the rise of a great wave in financial markets and assets, now the closing of the money tap has triggered the same wave to descend.
➔ While asset prices are growing exponentially with plentiful and cheap money, the opposite is now happening. Rising global inflation has led to the end of abundant monetary and economic policies. The game played on global markets based on this is also over.
➔ Of course, the effort to get rid of the high global inflation created by the abundant and cheap money lies behind the increases in interest rates and the reduction of money taps. Inflation in the United States and Europe is 8.6% and the world average is 8.7%. well it entered the current situation not by choice, but by necessity.
32 BILLION LOSSES
➔ As shown in the table alongside, in the first half of the year $ 22.8 trillion in the value of world stock markets, $ 8 trillion in the market value of global bonds, and $ 1.4 trillion in cryptocurrencies.
➔ A total of $ 32.3 trillion in meltdown occurred in three markets. This is equal to one third of world income in 2022.
➔ In the first half of the year central banks raised interest rates in 195 out of 332 meetings131 did not change the interest rate, 6 times the interest rates were reduced. Central banks of Russia have discounted 3 times, China 2 times and Uzbekistan 1 time.
➔ Although Turkey does not change its interest rate, it has the highest interest rate hike in the world. The Central Bank of Zimbabwe, which is experiencing one of the highest inflation rates, has gone from 80% to 200% at a time.
INCREASE IN GLOBAL INTEREST
➔ With rate hikes initiated under the leadership of the US central bank, the average yield on global bond yields increased from 1.3186% at the start of the year to 2.9096% at mid-year, according to Bloomberg.
➔ The data revealed that the global average bond yield increased 121 percent, more than once every six months. World interest rates are now once higher for the entire world and for all interest-based accounts.
➔ The importance of increasing the average yield shows that rising interest rates are widespread. In these cases, the feedback is very difficult.
➔ One of the consequences of this The amount of negative-interest-traded bonds worldwide decreased by 81% from $ 11.3 trillion to $ 2.1 trillion.
➔ The second result of the rise in interest rates is the US Treasury interest rate, which is based on loans from companies around the world. It was the jump in Libor rates.
➔ The 3-month dollar Libor rate increased from 0.209 percent at the end of last year to 2.285 percent at the end of June. The rate of change for 6 months is 993%. It is now more expensive to borrow for both governments and businesses.
THE BOND MARKET SAYS WITHDRAWAL
➔ Again seen adjacent The highest rise among interest rates such as US 3-month Treasury bills was 3.107%. The interest rate went up from 0.0530 percent to 1.7000 percent.
➔ In the second-highest rise, the change in US 2-year bond yields reached 303 percent. The interest rate went up from 0.7341% to 2.9554%.
➔ Short-term interest rates in the US are rocketing and closing the gap with long-term interest rates, and occasionally surpass them. indicating a recession in the economy.
➔ Reduced cash withdrawals, rising interest rates, and anticipating a recession have hit cryptocurrencies, interest-sensitive tech stocks and equity markets in the first place.
➔ As bonds became a safe haven as recession expectations tightened, interest rates started rising again. While the US 10-year bond yield increased to 3.498% on June 14, it fell to 2.791% on July 1.
THE GREATEST FALL THE MOST
➔ While the average loss in world stock markets reached 21%, the decline in the Nasdaq tech stock market was 29.5%.
➔ The decline is greatest in the major tech companies. grouped as FAANG The total market value of $ 7.878 billion on December 27, of 5 major tech companies made up of Facebook, Apple, Amazon, Netflix and Google, fell to $ 5.072 billion on June 16 and closed on June 30 from 5.245. As a result, the 6-month decrease is 33.4%.
➔ Fed rate hike by 0.75 points, whatever it was in mid-June.
➔ Equity markets in developing countries showed a more contained decline with the MSCI index of 18.8%. On a like-for-like basis, the loss of the Turkish stock market was 1.9 per cent and diverged positively.
THE MOST FALLEN TL
➔ Recessionary prices in the world economy impacted commodity prices, bonds and equities.
➔ While commodity prices were already on the rise, the Russia-Ukraine war hit them and the hikes picked up momentum.
➔ However, towards the middle of the year, both the war became more familiar and recession prices strengthened in world markets.
➔ This is due to the 15% copper loss and 17% decrease in the metals group. Food prices are also going down. It is for the same reason that the CRB Commodity Index premium fell from 40 percent to 25 percent.
➔ Rising commodity prices hit Turkey, which is a major importer on a net basis, while negative decreases have a positive impact. For most of the first half the impact was negative.
➔ As energy prices and import bills have risen significantly, Current account deficit expectations rose to $ 40 billion and beyond. This had the effect of lowering the value of TL and raising Turkey’s risk premium. CDS rates have increased by 50%.
➔ The TL continued to depreciate against the dollar. Even He took the lead in depreciation with 20 percent. The Argentine peso followed the TL with a loss of 18%, the Hungarian forint by 14% and the Polish zloty by 10%.
Brown bear market
➔ The balance in the first wound of the year is more or less like this. It was the worst 6 months of the last 50 years. Is the economic downturn over and over? Or is there more?
➔ There is no cheap salvation in these six months. Just as there was a super bull market that lasted 14 years with the effect of cheap and abundant money, it is now more than just a normal bear market. “Brown bear market” habitable.
➔ By 2022, every central bank will raise interest rates. Rapid rate hikes increase the risk of recession. In this case Everyone pays attention to the root cause of inflation. The first figure to look at will be the US CPI, which will be announced on 13 July.
➔ Due to fears of a recession triggered by interest rate hikes, markets are also looking at growth figures. The United States shrank by 1.6% in the first quarter.
➔ The second quarter also did not go well. If the contraction occurs again, regardless of whether NBER accepts it or not, the US will shrink for two consecutive quarters and enter a technical recession.
➔ While US second quarter growth is positive, it could be somewhere on the border.
➔ In this sense, on a date when the markets will concentrate It will be July 28, when US second quarter GDP is announced.
EMPLOYMENT AND BUDGET EFFECT
➔ But first this week June non-farm employment data will be announced. The expected figure is 295,000 jobs, on the rise. If there is a realization around or above expectations, the Fed will comfortably make its second 75 basis point hike on July 27.
➔ But if the increase in employment falls below 250,000, this indicates a rapid cooling of the economy, and therefore the Fed will make it difficult to increase by 75 basis points. Expectations drop towards 50 basis points.
➔ Next week, the attention of companies will revert to the second quarter statement. The growth forecast in company balance sheets has already been reduced from 6.8 percent to 5.6.
➔ While balance sheets come as expected, companies also announce their quarterly balance sheets and forecasts. Including revisions in forecasts that profits will decline may be a sign that the economy will contract.
➔ Realizations in economic data and corporate earnings increases are not good. After the worst semester of the last 50 years, it seems like a middle ground between the bad and the terrible.
NO OTHER BRANCHES TO OWN
➔ However, there is a different view across a sizable portion of global markets. “Poor data is good for the marketAccording to members of this group, news such as weakening employment growth and growing fear of a recession will be positive for the second half of the year.
➔ Because the central banks, which will turn off the money tap, will slow down in these cases. They won’t be able to press the brakes fast. They may also take their feet off the brake and lightly touch the accelerator.
➔ If this opinion is dominant, Friday, otherwise We will see the effect when the first economic data is announced which will come out negative.. For example, when Friday’s employment data is negative, the markets should have a little party.
➔ Inevitably, the question arises whether the functioning of economies and markets is so simple.
➔ Anyway In the second half of the year, the markets have no other branches to cling to, no other games to play. Unless there is an unexpected surprise.