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China's at a standstill | Not all big banks are created equal |

Hi Reader, here's what you need to know for July 18th in 3:02 minutes.

🤓 Earnings season is upon us, which means your ears will probably be ringing with jargon for the next few weeks. So join TradeStation’s David Russell for Your Guide To Earnings Season on Wednesday, and find out how to break company results down into something you can truly understand. Grab your free ticket

Today's big stories

  1. China's economic growth stalled last quarter
  2. Here’s how to do a better job of predicting where the markets will go than the pros have been doing – Read Now
  3. Two more big US banks posted their diverging quarterly results

Small Fry

Small Fry

What’s Going On Here?

Data out on Friday showed that China’s economy posted its second-worst quarterly growth in 30 years.

What Does This Mean?

We’ve had our whole team of analysts working on this head-scratcher all day, and they’ve come to a startling conclusion: it turns out that shuttering businesses and keeping your population locked in their homes isn’t productive for a country’s economy. No, really: China’s services sector – which accounts for over half its economy – shrank 0.4% last quarter from the same time last year, while its retail sales dropped 4.6%. It’s just a blessing that some Chinese factory workers basically lived on site, since manufacturing output managed to grow 0.7% from last quarter. But hostage-taking only goes so far, and the country’s economy ultimately only grew by 0.4% last quarter – well below the 4.8% of the quarter before.

Why Should I Care?

Zooming in: Be ambitious, but be realistic.
We now know that China’s economy grew 2.5% in the first half of the year, making its government’s full-year target of 5.5% – already a 30-year low – look well out of reach. Its economy would now need to grow by around 8% for it to happen, even as the country stands by a zero-Covid policy that’s currently putting a quarter of its population under some form of restriction. That simply isn’t going to happen, says Goldman Sachs: the investment bank now thinks the country’s economy will grow just 3.3% this year.

The bigger picture: A true underdog story.
China is a huge buyer of everything from oil to corn, so this slowdown doesn’t bode well for a global economy already hit by recession concerns. But China isn’t going down without a fight: economists are expecting its government to introduce hundreds of billions of dollars worth of stimulus to boost growth for the rest of the year (tweet this).

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Analyst Take

How To Forecast The Markets Better Than Wall Street’s Been Doing

How To Forecast The Markets Better Than Wall Street’s Been Doing
Photo of Reda Farran

Reda Farran, Analyst

Truth is, Wall Street’s market forecasters have a terrible record.

Back in December, JPMorgan predicted that US stocks would gain 5% this year, economists predicted the 10-year US bond yield would stick at 2%, and Goldman Sachs predicted that bitcoin would hit $100,000.

But six months later, US stocks are down 20%, the 10-year yield is at 3%, and bitcoin has more than halved to around $21,000.

So all you need to do a better job than them is to follow five simple steps.

That’s today’s Insight: how to become a superforecasting superstar.

Read or listen to the Insight here

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These EV stocks could disrupt the industry

Carmakers the world over are scrambling to make the most of the EV boom.

But with so many big players to choose from, it’s getting harder and harder to choose which EV stocks to back.

That’s where Luke Lango comes in: the top analyst just released his top EV stock picks for this year, and he reckons each and every one has the potential to disrupt the auto industry.

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Check Out The Report

Bank In Action

Bank In Action

What’s Going On Here?

Wells Fargo posted a disappointing quarterly update on Friday, but Citigroup managed to claw back some credibility.

What Does This Mean?

Wells Fargo has been bracing for an economic slowdown that could leave borrowers unable to pay back their debts, so it put aside $580 million for “loan loss reserves” last quarter. It had to write down $576 million worth of assets tied to its venture capital business too, and its mortgage income fell 79% as higher rates limited the number of new deals and refinancings. All in all, Wells Fargo’s profit didn’t just fall: it fell short of analysts’ expectations.

Citi, on the other hand, blew past them, even though it posted a lower profit of its own and had to put aside $1.3 billion in loan loss reserves. That could be down to the 14% more in net interest income compared to the same time last year, as well as the benefit its commodity and currency trading businesses got from volatile markets.

Why Should I Care?

For markets: Russia is a hard sell.
Citi’s stock jumped 11% after the announcement, but it’s still being beaten by Wells Fargo’s this year. It’s the cheapest of the six biggest US banks by multiple valuation metrics too, probably because it’s the most exposed to Russia. After all, it’s been struggling to sell its consumer and commercial banking business in the country, with the bank projecting that the whole debacle could set it back $2 billion.

Zooming out: We’re all in this together.
Investment managers are experiencing a similar set of issues: BlackRock – the biggest in the world – announced on Friday that the slumping market has dragged down the value of the portfolios it manages. So even though investors poured a net $90 billion more into its range of funds last quarter, BlackRock’s profit still collapsed by a worse-than-expected 30% from the same time last year.

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💬 Quote of the day

“Yesterday is not ours to recover, but tomorrow is ours to win or lose.”

– Lyndon B. Johnson (an American politician)
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See important disclosures here.

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🎯 On Our Radar

  1. Graham crackers are fun. The man who invented them wasn’t.
  2. Get that fancy dinner for free. Now that’s what we call a reward.*
  3. Redecorating your living room? Might be time to join a dinosaur skeleton auction.
  4. The UK is having a leadership battle. A spear of asparagus just predicted the outcome.
  5. Destination: Miami. Especially if you’ve just had a BBL done.

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🌎 Finimize Live

🎉 Coming Up This Week…

All events in UK time.

🌍 Blockchain, Crypto, and ESG: 5pm, July 19th
👀 Your Guide To Earnings Season: 3pm, July 20th
🎉 Navigating The World Of Stablecoins: 6pm, July 20th
🔥 How To Use Machine Learning For Trading: 12pm, July 21st

🥳 And After That…

🍷 Is Wine The Perfect Recession-Proof Investment?: 1pm, July 27th
♻️ Building A Crypto ESG Framework: 6pm, August 2nd
📈 A Case For DAO Treasury Diversification: 6pm, August 9th
💻 How To Spot The Best Tech Stocks: 6pm, August 16th

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