Best Guesses

Good Morning Ladies and Gentlemen

„You can’t always get what you want, but if you try sometimes, you might find you get what you need.“

by Sir Michael Philip „Mick“ Jagger

Best Guesses

You know, Ladies and Gentlemen, traditionally, during Q1, when I am involved in the yearly „year-end competition“, I always wonder what guesses my readers come up with. I find it particularly interesting to see how the ones who participate see markets evolve over the coming months. While I am fully aware that all statements that anyone participating can ever make are best guesses based on currently available data, it is still intriguing to see how close some of you get towards the end of the year when we call the winner. I am always wondering why the participants come up with the guesses they come up with. I, for example, always use the same methodology.

No science

Predicting the price of anything is no science to me; it is guessing. Now, having said (written) that, is it not the case that even science itself is best guesses based on currently available data? Since new data is constantly being brought to light, i.e. reality is continually changing, the conclusion must be that science is a dynamic process. Thus, findings and results may change according to newly available data.

Interpretation

Most of us are looking more or less at the same data, yet the interpretation of that data may vary hugely. We are steeped in our experience, leading to different conclusions. This is so fascinating, and because of how it is, we have to be particularly careful when adopting the ideas and findings of others because they function the same way and are also guessing on currently available data (hopefully solid data).

Signs of positive macroeconomic data

The relevant purchasing managers‘ indices for the USA, the N.Y. Empire State Index and the Philadelphia Fed Index, recovered in February. Both indicators relate to the manufacturing sector. The eurozone is also showing signs of bottoming out. The service sector was able to reach the 50-point mark. The manufacturing sector reached its lowest point in the fall of 2023.

What does this mean for interest rates?

Yes, Ladies and Gentlemen, this is a valid question because futures traders on U.S. fixed interest rate products are now expecting the first key interest rate cut for June 2024. Some weeks/months ago, it was still March 2024, i.e., there was a shift in currently available data, which led to a change in consensus among market participants from a more recessionary trend in economic performance to a lessening one.

Economic growth and interest rate decrease?

Again, it is a valid question if you ask me. I currently believe market participants are almost a little complacent. The forecasted economic growth and hope for interest cuts simultaneously do not go well together. On the contrary, increasing economic growth may spark further persistent inflation. I am cautious about a rapid interest rate cut and prefer to be surprised positively rather than negatively. We will see!

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li