“The hippies wanted peace and love, we wanted Ferraris” Alice Cooper

The first day of the second half of the year was a lacklustre one, despite some slightly better-than-forecast economic data, on the face of it anyway. Job openings unexpectedly rose in May, and the Republicans passed President Trump’s tax-and-spending megabill through the Senate. The S&P Global US Manufacturing Index came in higher than forecast. Some analysts noted that upon closer examination, the employment report was not as positive as the headlines suggested.

Fed Chair Jerome Powell, speaking at a conference yesterday, stated that the solid economy is allowing the central bank to maintain its wait-and-see approach to interest rate cuts, but went on to indicate that the Fed would likely have continued to gradually lower rates this year if not for concerns about tariffs. So it’s your fault, Mr Trump, we have not done your bidding so far. If you want my tuppence-ha’penny worth, I will have a small wager that the Fed cuts in July, which is not the consensus view. The next Fed meeting is not right until the end of July, by then, the 90-day tariff pause would have come to an end, and the picture would have become clearer. So why wait till September? Thursday is the big day for the jobs market, when we get the non-farm payrolls, unemployment rate, and other key data. Any further signs of weakness in the jobs market and the odds will increase significantly in July of a cut.

Technology was one of the weakest sectors yesterday, falling just under 1%. Palantir, one of the darlings of the tech sector, has seen its shares decline by over 10% in the past two days, following the disclosure by its CEO, Alex Karp, of a new trading plan to sell up to 10 million shares.

One thing of note in the first half of the year has been the strength of sterling against the dollar, and I understand that this has been more about the weakness of the dollar than the strength of sterling. I wonder if we have reached the peak for sterling. Real interest rates in the UK are close to zero, inflation is at 3.5%, and the interest rate is 4.25%. Whereas in the US real interest rates are closer to 2%, that would suggest sterling should weaken at some point relative to the dollar.