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WEEKLY ROUND-UP Thru June 24th 2022; Another Bull Trap?

Hey folks, we’ve had a wild ride in the month of June. Now we are currently undergoing another potential Bull Run but the key will be how far and for how long? Get my take on the current market status in this week’s round-up.


Major indexes finished sharply higher this week after selling off the prior 3 weeks suggesting a solid bounce was in the works…Signs that inflation might be moderating as growth cooled helped stocks rally sharply over the holiday-shortened week, lifting the S&P 500 Index out of bear market territory. Month- and quarter-end flows may have increased trading volumes, as did the rebalancing of Russell indexes following the close of trading Friday.

The week’s economic data offered several signals that the Federal Reserve’s forceful turn toward monetary tightening was having the intended effect of slowing the economy and moderating inflation. Existing home sales fell to their lowest level in May since June 2020, and its chief economist predicted further declines ahead in the face of higher mortgage rates. The Chicago Feds reported its gauge of national economic activity had reached an eight-month low while the S&P Global’s index of June manufacturing activity came in well below forecasts (52.4 versus roughly 56), and its services gauge also missed estimates and hit its lowest level since January. The University of Michigan’s final reading of June consumer sentiment was revised down to 50.0, its lowest level in records dating back over four decades.

Fed Chair “Boom Boom” Powell testified before Congress saying that inflation expectations appeared to remain anchored boosting market sentiment in both equity and fixed income markets. Despite hawkish comments from some other current and former Fed officials, futures markets began pricing a slightly higher chance of only a 50 bps increase in the Fed funds target rate at the next policy meeting—although another 75 bp increase still seemed the most likely.

Germany moved to the second “alarm stage” of its emergency plans to reduce gas consumption and increase storage inventories of the thermal fuel after Russia sharply reduced pipeline flows. Other countries are also implementing measures at countering energy supply needs. S&P Global’s Flash Eurozone Composite PMI, which gauges services and manufacturing activity, fell from 54.8 in May to 51.9 in June—its lowest level since February 2021. Consumer confidence in the eurozone unexpectedly tumbled to -23.6 points in June nearing its lows during the peak of Covid in March 2020. Meanwhile, UK inflation accelerated to a record 9.1% in May as food costs rose at the fastest rate in 13 years while the UK PMI data remains at 15-month lows coming in a 53.1 in June.

Japan’s core consumer price index rose 2.1% year on year in May, topping the BoJ’s 2.0% inflation target for the second consecutive month. Many members of the BoJ expressed the view that underlying inflation, excluding such factors as energy, remained relatively low. Members shared the recognition that there was no change in the BoJ’s stance.

Chinese stock markets advanced on stimulus hopes after President Xi Jinping pledged to roll out more measures to support the economy and minimize the impact of COVID-19 during a BRICS gathering. Many analysts have lowered their growth forecasts for China after the country’s zero-tolerance approach to the coronavirus led to widespread lockdowns that disrupted economic activity and global supply chains this year. The persistent property slump has raised fears that it poses a greater risk to China’s economy than the recent coronavirus lockdowns.

Enjoy this Week’s Round-Up

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