Osservatorio | July 2024

At a glance:

• The nervousness of the markets, manifested by sharp swings in bond prices and swings in share prices, reflects uncertainty about the outcome of monetary tightening
• Will it end in a US recession? In reality, the ongoing slowdown in the US is deliberate and necessary to lower the temperature of prices
• The US real wage bill is rising at a steady pace due to less erosion of purchasing power from inflation. Even in Europe there are employment records and unemployment is at its lowest level
• The Eurozone is slowing down, weighed down by manufacturing, and remains at the tail end of the global convoy, while in Asia, India is hot on the heels of China
• Wage dynamics diverge: it remains higher in Europe while falling in the US. Margins suffer from higher cost increases for inputs that outputs
• The value of equities on Wall Street has risen much more than nominal GDP: one of many signs of rich valuations of listed companies. However, the indices are dominated by the Magnificent 7, which continue to deliver stratospheric profits
• The debate on US stock market valuations continues and European stocks should not be trading at such a historical discount to the US