Dusted off an anecdote about the mysterious nature of markets, physics, quantum entanglement (see below). I take late summer off from writing. Making more space for family, reading, wandering. Wishing the same for you. All the very best, Eric
Week-in-Review: Mon: US durable goods orders -9.4% (-9.3%e), factory orders -4.8% as exp. South Korea CPI 2.1% as exp. Turkey CPI 33.52% (34.10%e). Trump says he will be “substantially raise” India tariff, citing purchases of Russian oil. S&P +1.5%. Tue: US trade balance -$60.2b (-$61.0b e). Eurozone PPI 0.6% as exp, PMI comp 50.9 (51.0e), PMI serv 51.0 (51.2e). Indonesia 5.12% (4.80%e). US tariffs on semiconductor and pharmaceutical imports will be announced within the next week. Trump says Bessent declined to be considered to replace Powell. S&P -0.5%. Wed: Eurozone ret sales 3.1% (2.6%e). Taiwan CPI 1.54% (1.40%e). India repurchase rate 5.5% as exp. Trump plans Putin, Zelenskiy meeting as soon as next week. India tariff doubled to 50% over Russian oil. Apple commits to spending another $100B on domestic manufacturing as it seeks to avoid 100% semiconductor tariffs. S&P +0.7%. Thu: US jobless claims 226k (222k e), cont claims 1974k (1950k e). UK bank rate 4.0% as exp. Mexico CPI 3.51% (3.53%e). Mexico overnight rate 7.75% as exp. Christopher Waller has emerged as a leading contender to replace Powell. Trump names Stephen Miran as Fed Governor, who will need confirmation by the Senate, to serve the expiring term of Adriana Kugler. Israel states intention to occupy all of Gaza. S&P -0.1%. Fri: China CPI 0.0% (-0.1%e), PPI -3.6% (-3.3%e). Canada unemp 6.9% (7.0%e). Trump administration clarified that gold bars should not face tariffs following a spike in gold futures when a ruling implied they’d be subject to duties. Trump announces meeting with Putin next Friday to broker ceasefire agreement. S&P +0.8%.
Manufacturing PMI (high-to-low): India 59.1 (previous month 58.4), Sweden 54.2 (previous mth 51.8), Vietnam 52.4 (prev mth 48.9), Spain 51.9/51.4, Netherlands 51.9/51.2, Greece 51.7/53.1, Norway 50.9/49.26, Hungary 50.7/49, South Africa 50.3/50.1, Singapore 49.9/50, Italy 49.8/48.4, Czech Republic 49.7/50.2, China 49.5/50.4, Indonesia 49.2/46.9, Hong Kong 49.2/47.8, Germany 49.1/49, Mexico 49.1/46.3, Japan 48.9/50.1, Switzerland 48.8/49.6, Austria 48.2/47, Brazil 48.2/48.3, France 48.2/48.1, US 48/49, UK 48/47.7, South Korea 48/48.7, Russia 47/47.5, Taiwan 46.2/47.2, Canada 46.1/45.6, Poland 45.9/44.8, Turkey 45.9/46.7. Services PMI: India 60.5/60.4, US 55.7/52.9, Spain 55.1/51.9, Australia 54.1/51.8, Japan 53.6/51.7, China 52.6/50.6, Italy 52.3/52.1, UK 51.8/52.8, Ireland 50.9/51.5, Germany 50.6/49.7, Sweden 48.8/54.3, Russia 48.6/49.2, France 48.5/49.6, Brazil 46.3/49.3.
Weekly Close: S&P 500 +2.4% and VIX -5.23 at +15.15. Nikkei +2.5%, Shanghai +2.1%, Euro Stoxx +2.1%, Bovespa +2.6%, MSCI World +1.9%, MSCI Emerging +2.8%, Bitcoin +2.7%, and Ethereum +14.4%. USD rose +0.4% vs Russia, +0.2% vs Yen, +0.2% vs India, and +0.1% vs Turkey. USD fell -2.0% vs South Africa, -1.9% vs Brazil, -1.5% vs Mexico, -1.3% vs Sterling, -1.2% vs Indonesia, -0.8% vs Sweden, -0.7% vs Australia, -0.5% vs Euro, -0.3% vs Chile, -0.2% vs Canada, and -0.2% vs China. Gold +2.7%, Silver +4.4%, Oil -5.1%, Copper +0.8%, Iron Ore +3.3%, Corn -1.3%. 10yr Inflation Breakevens (EU -1bp at 1.75%, US +6bps at 2.40%, JP -4bps at 1.47%, and UK -3bps at 3.04%). 2yr Notes +8bps at 3.76% and 10yr Notes +7bps at 4.28%.
2025 Year-to-Date Equity Index Returns: Greece +58.6% priced in US dollars (+40.9% priced in euros), Poland +57.5% priced in US dollars (+39.4% priced in zloty), Hungary +53.5% in dollars (+31.5% in forint), Czech Republic +50% (+29.8%), Austria +44.5% (+28.9%), Spain +44% (+27.9%), Colombia +42.3% (+30.7%), Korea +41.9% (+33.8%), Portugal +37.9% (+22.5%), Italy +36.5% (+21.8%), Germany +36.1% (+21.4%), Ireland +32.5% (+17.7%), South Africa +32.1% (+24%), Mexico +31.8% (+17.3%), Chile +30.5% (+27%), Israel +30.4% (+22.7%), Brazil +28.7% (+13%), Norway +28.2% (+15.7%), Finland +27.8% (+14%), Belgium +25% (+11%), Euro Stoxx 50 +23% (+9.2%), HK +22.6% (+23.9%), Vietnam +21.6% (+25.1%), Sweden +20.8% (+4.8%), UK +19.5% (+11.3%), Singapore +19.1% (+11.9%), France +18.2% (+4.9%), Canada +17.5% (+12.3%), Taiwan +14.6% (+4.3%), Switzerland +14.6% (+2.3%), Netherlands +14.3% (+1.4%), Australia +13.9% (+7.9%), Japan +11.5% (+4.8%), NASDAQ +11.1%, MSCI World +10.5% in dollars, China +10.2% (+8.5%), UAE +9.5% (+9.5%), S&P 500 +8.6%, Indonesia +6% (+6.4%), New Zealand +4.3% (-2%), India +0.7% (+3%), Malaysia 0% (-5.2%), Russell -0.5%, Philippines -1.1% (-2.9%), Turkey -3% (+11.6%), Thailand -4.8% (-10.1%), Saudi Arabia -9.1% (-9.2%), Denmark -19.1% (-27.8%), Argentina -29.2% (-9.2%).
Anecdote (Sept 2018): “I’m fortunate to live in a time where the political system allows my kind of work,” said the Physicist. “Historically, it’s not always so.” Below us particles raced around CERN’s 27km subterranean track, held in precise formation, accelerating toward collision, obliteration, observation. We discussed magic, mysteries, the sublime wonder all around. “It’s incredible that we’ve been able to learn so much about nature, and that the language of mathematics turns out to be so effective in describing it,” he said. I smiled, having never quite considered that fact. “We’re now trying to produce a substance found throughout the universe that interacts with gravity but not light,” he explained. “But so far, no success.” The existence of Dark Matter was first hypothesized in the 1930s, we’ve searched ever since. It accounts for 95% of the Universe’s mass. The Physicist asked me about markets, intrigued by their movements, mechanics. There are parallels with quantum theory. Investor perceptions impact markets, which in turn changes investor perceptions in a reflexive loop that grows highly unpredictable in the extreme. The greatest opportunities in markets often reveal themselves first as mysterious phenomena. When markets move in opposition to general principles, it often means that something fundamental is changing. Reality is always changing. Our job as investors is to identify shifts early and adjust our frameworks accordingly. I asked the Physicist to explain the mystery that confounded Einstein and every physicist since: Quantum Entanglement. “I can understand the equations that describe it. But I’m intuitively mystified by the phenomenon,” he admitted. “In my field of work, I’m astonished often. And each time, I’m reminded that what we know about reality fits within perhaps 5% of all there is. And when you know so little about something so vast, it’s impossible to be certain whether what you believe you know is even reality.”
Good luck out there,
Eric Peters
Chief Investment Officer
One River Asset Management
Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.