The Quarter Starts with a Bing, Bang, and a Boom

For those watching markets, last week felt long for an abbreviated week of trading. An event-filled week ended with choppy waters due to “good news is bad news and bad news is good news” economic data. The S&P 500 was down -1.16%, the Dow Jones was down -1.41%, and the NASDAQ was down -0.92%. Bonds saw long duration selling off on bullish employment data, with the Agg down -1.45%. Alternatives continued to be mixed, with Bitcoin futures up 0.85%, gold up 0.74%, silver down -0.56%, and oil up 1.64%.

Economic Reports created a whipsaw Thursday and Friday, where an exceedingly strong ADP Employment print on Thursday led to a painful trading session across the board. Friday brought weaker-than-expected nonfarm payrolls and downward revisions to the prior month’s print, driving markets to rally. Both of these reports and driving market forces came on the tails of Wednesday’s release of the June FOMC minutes, which took a decidedly hawkish tone showing internal pressures for further rate hikes. We left the week with expectations of higher-for-longer Fed policy and a likely hike at the next FOMC meeting July 26.

This week, we have more economic data to look forward to with Consumer Credit (SA). As student loans are set to restart at the end of the summer and the likely further rate increase in July, the burden of consumer credit is a metric we are watching to monitor the resilience of the consumer. Wednesday follows with CPI prints expecting core CPI (M/M, SA) to fall from 0.4% to 0.3% and headline CPI (M/M, SA) to bounce from 0.10% to 0.30%, as food and energy impacts are felt. PPI (Producer Price Index) and jobless claims release Thursday morning, with core PPI (M/M, SA) expected to be flat and headline PPI (M/M, SA) expected to bounce upward. Although watchful for unexpected surprises in inflation and unemployment, we expect the data in the week ahead to firm the expectation of a rate increase at the July FOMC meeting.

In geopolitical events, rioting continued in France and has seen thousands arrested and over a billion dollars in damages.  Most damaging, however, was French President Macron’s deflection to video games as the cause of the violence and suggesting social media should be suppressed in the future to stifle dissent–a move that drew comparisons to authoritarian states. The war in Ukraine continued, with the United States said to be supplying Ukrainian forces with cluster munitions, which are criticized for risks to civilians of unexploded bomblets and phased out by the United States Military usage in 2016. Globally, Monday, July 3, set the record for the hottest day on record only to see the record broken for the next three days with Thursday recording a global average temperature of 63.01 degrees Fahrenheit. El Niño has driven temperatures higher, and is expected to continue for the next six weeks.

Coming back to a volatile, shortened trading week to start the quarter, we expect continued over-eager trading on data prints, and we plan to hold fast to our sails avoiding the winds of distraction. We hope everyone was able to enjoy a reprieve from the heat and the markets this past week and took time to focus on what is most important. “For the sun rises with a scorching wind and withers the grass; and its flower falls off and the beauty of its appearance is destroyed; so too the rich man in the midst of his pursuits will fade away.” – James 1:11

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