Investment Thesis to July End

Below are some very brief summary notes from my investment thesis.

My Central Forecasts: 

Fed to cut rates by 25bps at the end of July. 

This brings the Fed Funds rate down to 2.25%. Essentially removing the December hike. 

Market is priced 100% for this cut. 

Conditional upon: US CPI remaining at or below 2%. If CPI rises, then change forecast – mildly less probability of a cut. 

Q2 GDP annualised in range 2.8-3.1% - any less could indicate a 50bps cut. Any more could indicate no cut dependent upon the CPI. 

SPX500 to hit all time high by end of July 8th week. Conditional upon the above all playing out similarly. SPX500 to continue to push on until end of July – potentially adding 2%. 

Earnings seasons results to come in better than expected, but still not promising. Especially confident in my own shareholdings. 

Situation in the Gulf of Mexico and tropical storms to mean that oil prices remain in the $55-60 range. Conditional upon no major escalations in the Middle-East Which I expect to remain quiet until the end of the month at the least. 

Continuation of trade talks and announcement of another meeting – push SPX500 up another 1%. 

GBPUSD to continue downtrend. Especially after installation of Boris Johnson.

Forecast for end of July: £1 = $1.22 EURUSD to take a temporary bounce from the cut by the Fed (again assuming all of the above).

Pushing back towards $1.14 However, also depends on key German data as to whether the ECB is likely to take further action. Watch Lagarde comments for future directional impulse.

VIX – Likely to descend down to the $13 level again. At this level, may be worth purchasing some contracts as spike likely as earnings season really heats up. Heading into August/September/October I expect a significant increase in volatility. At which point Trump will make sudden progress with the China trade talks.