“High expectations are the key to everything” Sam Walton

July seems to have flown by as the second quarter results season continues apace, providing investors with both pain and gain. Some of the pain comes from those companies which rely on advertising for revenues, something that easily gets cut back on during times of stress, Snap and Twitter are two of the more noteworthy. Walmart was the headline maker as it cut forecasts as the company admitted to having to slash prices to reduce inventory as consumers stayed at home. On a positive note, this may add further to the hope inflationary pressures are easing. Some others provided gain, Texas Instruments and 3M. Microsoft earnings fell short of expectations as the management blamed currency, a lack of chips for the Xbox, and advertising. The movement of the share price after hours suggested the market was there already.

Stocks had a fairly poor day on Tuesday as the IMF lowered its forecasts for economic growth and raised its expectations for inflation. The IMF now forecast global growth to be 3.2% for 2022 and inflation to reach 6.6% for advanced economies. As is usually the case the IMF are behind the curve of most economists.

Advanced stock markets are likely, with all things being equal, to close the month roughly where they started them. That is with the caveat that the Fed does not spring any nasty surprises later on Wednesday. This stabilisation in indexes has resulted in a few investors starting to dip their toes back into the equity waters. According to Citigroup as futures, positioning has become less bearish. Positioning remains bearish just less so. Investors remain wary of the FTSE 100,  however, US equities and Eurostoxx 50, in particular, are rapidly becoming more balanced with the flow of new long positions in the recent rally.

Europe remains a basket case as Russia has blamed technical problems for further reducing its supply of gas to Europe. A move that continues to put pressure on the euro area economy, raises the risk of a recession at a time when the ECB is under pressure to stem inflation by raising rates. Goldilocks has well and truly left the building. The ECB announcement last week of the transmission protection scheme to prevent the widening of spreads between German and more peripheral euro area countries has had little effect.