Pick your poison is the typical mood of money managers this summer, as a realization that the best deals are when growth is slowing, and share prices are down, although not many will recognize that. In this sense it's like today's Amazon Prime Day for stocks, but it lasts for weeks or even months. And it's not resolved by the turbulence of Tuesday's session, and even what's ahead.

Pixabay

For sure, generally there will be margin pressures on many sectors, and sure, we all know the conflicting views about the implications of the upcoming CPI Wednesday morning, which could result in alternating turbulent S&P waves. A similar situation can occur with certain key big-cap technology stocks, mostly those that focus in the Enterprise sector. Plus you have Oil stocks declining in the wake of our belief the upward spike to 120+ was unsustainable. To some degree the slippage of Oil was desirable for 'inflation peaking', but not for the behavior of the Averages, or for that matter confidence in economic strength.

There's no point to dwell on the impact of a +/- 9% annualized CPI coming up, while a 10% rate would probably impact the S&P more in the initial moments. I will not be surprised if, after digesting an reaction, the S&P stabilizes later as various sectors are dissected and evaluated, as I've previously noted likely to start showing signs of fading, if not flat-out evidence of inflation peaking.

Today, Heathrow (London's primary airport.. LHR) announced trimming flights permitted for the Fall, and that's based on incredible Summer demand so far. I suspect the 'travel' component of the CPI will rise notably, but again ensuing data will likely reverse that, as travel plunges after next month, partially as the new school year starts, but also if COVID variants continue to spread as claims suggest. I know The White House is claiming inflation is 'not so bad' to worry people, although while their premise is disputable, I agree it's starting to fade.

So, Oil is shaking-out as suspected likely, although I'd prefer if it were Ukraine ceasefire initiatives, rather than 'curious' cozying-up between Russia and Iran. The idea of Iran teaching Russia how to use drones in warfare is shameful if it is true (the Russians are supposed to be a significant technological nation).

At the same time Putin planning a trip to Tehran suggests he wants to muddy the waters of the Middle East (or stir-up oil-laden desert sands I should say) .. yet-again. And we have our President Biden going to Saudi Arabia, perhaps to just explore business or military deals, but probably to press for production increases from the OPEC leader, as lamentable as that idea is to many of us. Besides the perception for several years of indirect diminished U.S. interest in the region, any groveling for foreign oil production is a bit .. well, desperate as even if it's primarily on-behalf of the EU needs, this is getting out-of-hand.

Actually the slide in Oil is predicated on slower demand in China, but that's for sure the COVID fear more than actual longer-range demand contraction. China essentially closing Macau casinos yesterday was an eye-opener to hopes that China would back-off their COVID-zero policies, given that it's contradictory in a sense to growth objectives proposed before the Communist Party Congress.

The most crucial concern is not merely if a 'recession is on the way', or even whether it's already here. It is a potential of energy-based carnage in the EU if 'G Day' comes and goes without Nordstream 1 reopening after 'maintenance'.

Natural Gas being curtailed would of course endanger the German economy, and I think you've seen the ultimate greed today when BMW announced (and it's not April Fools Day as far as I know) they will charge 'subscription rates' to use heated seats presumably in all new BMW's sold. To wit: if you own one no charge to use what you already paid for (this is hilarious if not incredible), and if you don't it will be standard, but you can't turn it on without a subscription.

Of course that can't be allowed to fly. They tried something similar before (it might have been with Navigation updates), and reversed that effort. Maybe if they succeed with 'heated seat' subscriptions, by Spring you'll have to pay to lower the power windows. I'm being slightly sarcastic, but the automakers for a long time have been jealous of the recurring business model of satellite and radio and Tesla (who really started this), for-instance charging for a hotspot in your car even if it can simply link to the cellphone you already have present.

But above all is the specter of possible earnings guidance that is slower than the Q2 reports (aided by inflated revenue), followed by sobering realization of a European crisis in the making, 'if' the Russian 'nuclear gas' option is applied (Putin could be nuts enough to swallow the loss of revenue, if he's confident a desperate Germany would turn favorably to his terms quickly, which they sure must not do, but that doesn't mean he doesn't perceive things incorrectly.)

So the real risk might be fears of Gas rationing, industrial shutdowns, massive economic dislocations and so on .. not now but next winter. Some of this may be Putin trying to convey that he's 'not done' and 'not' ready for a ceasefire. Of course that matters, and one way or another, a resolution would be bullish for stocks, preferably without further compromise of Ukraine's sovereignty.

Bottom-line: 

We expected to see turbulence with a defensive on-hold market ahead of CPI and initial earnings flows, and that's surely the case. Intimidation from Russia and Iran isn't helping, as our President heads to the Middle East.

If the stock market does take another hit this Summer, maybe BMW will find it in their corporate interest to rescind their latest greedy $180 / yearly charge to heat your seats. That has as good odds of being acceptable to customers as a view of the S&P roaring to record highs in the next few weeks. Not doable.

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