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WEEKLY ROUND-UP Thru July 1st 2022: Micro vs Macro

Hey Folks, this will be a long holiday weekend for US Markets with Monday being our Independence Day. Enjoy the break and I am sure many of you will need a break with the very ugly performance in the US markets during the first half of 2022. Our members did very well with our Portfolio up over 20% for the first half of the year. Get my take on where we can go from here.


Major indexes finished lower 3 out of the past 4 weeks with this week coming to an end to the downside despite Fridays move higher. Thru the first half of 2022, the S&P was down 20.6% representing a loss of over $9 Trillion in value and its worst start to a year since 1970…The DOW was down 15.3% showing its worst start to the year since 1962 while the NASDAQ plunged 23.9% and the Russell fell 23.9% both the worst on record for each. There was really no where to hide since the average Bond Fund fell over 10.7% representing its worst start to the year since 1975. The only bright spot was in commodities where Energy markets shined with a YTD gain over 33.5%. I see two certainties in the current markets; Feds will increate rates further and go-forward Corp profits will shrink…this raises the probability of a recession in the next 12 months over 50%..

Much of the week’s economic data missed consensus expectations, and some signals suggested that economic activity might even be slowing. Consumer confidence came in much lower than anticipated and a measure of manufacturing activity in the Mid-Atlantic region fell to levels not seen since the height of the pandemic. Adjusted for inflation, purchases fell 0.4% in May, the first decline in 2022, driven by a 1.6% drop in goods purchases; purchases of services rose 0.3%, but much of the increase was driven by spending on housing and health care. Inflation-adjusted disposable income, reported Thursday, fell 0.1% over the month. The Atlanta Fed’s GDPNow model estimate of annualized growth in the second quarter down to -1.0%. In addition, anecdotal reports of scattered hiring freezes and layoffs continued to intensify.
The Fed’s preferred inflation gauge, the core (less food and energy) PCE price index came in at 4.7% for the 12 months ended in May, slightly below expectations and the lowest level since November. Along with the sluggish economic data, this appeared to help push the yield on the benchmark 10-year U.S. Treasury Note as low as 2.79% in Friday trading, its lowest level in a month.

ECB President Christine “Queen Bee” Lagarde reiterated guidance for an increase of 25 basis points followed by another hike in September, the size of which depending on incoming data. Meanwhile, Eurozone inflation accelerated to another record high of 8.6% in June, driven by soaring energy and food costs, according to Eurostat’s early estimate.
Worsening sentiment among Japan’s large manufacturers and a bigger-than-expected drop in industrial production also weighed on risk appetite. The BoJ continues to support their economy with stimulus spending as necessary, while inflation came in at 2.1%.

Chinese stocks advanced on the back of strong factory data and easing coronavirus restrictions for travelers. The official manufacturing and services purchasing managers’ index (PMI) both rose above 50 in June as a drop in new omicron infections allowed the government to ease restrictions. The People’s Bank of China (PBOC) said it would employ structural policy tools to boost confidence in the economy following the central bank’s quarterly monetary policy committee meeting.

Enjoy this Week’s Round-Up

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