Posted July 01, 2022
By Sean Ring
Monthly Asset Class Report
- Commodities finally got their smack, down over 9% this month.
- Both copper and silver tell us the economy is slowing down.
- Stocks, bonds, and real estate were also down. The USD is up, but thats not great news.
S&P 500
What an ugly month for the broad market!The SPX was down 7.7%, which capped the worst first half of a year since 1970.Geez, even I wasnt born yet!Our bear market rallies arent lasting as long as they should, which isnt good.My call that well head down to 3,213 or thereabouts remains in force.Nasdaq Composite
The Nazzie was down 8.05% this month, thanks to a 4.99% drop in the last week of the month.This is a godawful chart. Tech - and as youll see, crypto - are amid ugly bear markets with terrible sentiment to match.Avoid.Russell 2000 (Small caps)
From three months ago:The Russell has held steady to its great credit, but I stick to my $160 call.
Were at $169 now, and theres no reason to stop here.Beyond $160, Id start looking at the $140-145 zone.The US 10-Year Yield
The Fed boosted rates by 75 bps this month. Powell and Co are still expected to go again with a 75 bps hike in July.Yet, the 10-year yield hasnt moved much above three percent. And when it has, its come right back down.Thats because the market believes Powell will cower and not do a Volcker.It frightens me to agree with them, but I cant see the FOMC going the entire distance to defeat inflation.Dollar Index
From last month:My guess is the USD will hover between 98 and 104 until Powell convinces the market hes going to squash the inflation threat.
Fed Board member Waller wants hikes until rates hit at least 2.5%, but is happy to go higher.
If the rest of the Fed Board feels that way, the USD will retest 105 and breakthrough.
Were at 104.46 after bouncing off that last Fibonacci level of 103.75.Im on a call every Monday with a bunch of astute investors. We agree that dollar strengthening, and not dollar weakening, will destroy the financial system.Crazy call: I think were hitting 120 in the dollar index.And that spells enormous trouble both at home and abroad.USG Bonds
We had a nice little rally in the TLT to end the month.I still dont think its enough.$105 remains my next target level.Investment Grade Bonds
We got to 107, which is a mere buck above my next level.But then we had a nice rally to end the month.My guess is more selling to start July with the 107 level very doable.High Yield Bonds
That big up candle to close out May threw me for a loop.But junk got crushed in June, and now were at the 50% level on the Fibonacci chart.Do we bounce, or do we fall to 70ish? Id bet on the latter.Real Estate
From last month:Im starting to think were at the end of a distribution area, rather than just being rangebound with false breakouts.
That is, I think a whole bunch of investors got out of the ETF in the past few months.
In fact, this chart looks eerily similar to the SPX chart above.
Im puzzled, as real estate usually likes inflation.
But the chart doesnt lie. Its bearish.
Yup. VNQ was down nearly 10% this month because most Americans cant afford houses anymore.The inflation play is officially off.Base Metals: Copper
From last month:Again, we were sitting rangebound in copper for ages.
Now Im beginning to think stupid economic policy is finally weighing on this leading indicator.
Were right about at a death cross (when the 50-day moving average cross below the 200-day).
This could be bearish for the economy.
I shouldve been bolder. Dr. Copper got crushed. Hes telling us economic production is slowing down.
Really not good.
Precious Metals: Gold
As Tom Jones once sang, Why, why, why, Delilah?
Golds been terrible this year. It annoys me to no end.
Precious Metals: Silver
Yawny McYawnface is down this month.
Silver has many industrial uses. So this move corroborates Dr. Coppers story for me.
The economy is in deep trouble.
Cryptos: Bitcoin
This chart isnt bearish. Its broken.
See you at $10,000.
Cryptos: Ether
For this mess of a coin, Ill see you at $400.
Trad Asset Class Summary
Commodities, long the winner in the asset class derby, took a massive hit.
Seventy-five basis point hikes will do that to you.
Stocks also took a drubbing, with the SPX down 7.70% for the month.
Bonds were pretty flat, just down -0.53%.
The USD gained again, much to the chagrin of foreign USD debt issuers, up nearly 2%.
Crypto Class Summary
Monero finally had its reckoning in the sell what you can, not what you want crypto sell-off Olympics.
ETH, my favorite coin, had another harrowing month.
The granddaddy of them all, BTC, was down over a third.
The crypto world is as ugly as it gets but may still get uglier.
Wrap Up
Im sorry I couldnt bring you cheerier news.
But we seem to be unwinding the most significant period of excess credit expansion in history.
And that unwind is taking everything down with it, except the USD.
That may be Gods final joke for this era.
It wont be a hyperinflationary Gideon Gono/Zimbabwe-like experience that brings the world financial system to its knees.
Itll be the almighty dollar!
The Big Man Upstairs has some sense of humor, aye?
And heres the meme of the month, courtesy of the Babylon Bee:
Have a wonderful weekend!.
All the best,
Sean