6/30/25
The Market
Technical
Follow through we got---just not in the direction
of my gut feeling. Ah well, it makes the summer nice. As you can see, the
S&P re-established the uptrend off its 4/7 low, reset its very short
term trend from a trading range back to up, left the average above all three
DMAs and in uptrends across all timeframes. July is traditionally a good month
for Mr. Market. So barring another s**t bomb from the Donald, we are likely to
have smooth sailing over the near term. Given valuation levels, I am not making
any new investments though traders might want to participate.
The long bond finally made some upside progress,
having a good week, resetting its 50 DMA from resistance to support and
seemingly about to challenge its 100 DMA. Given that it is in downtrends across
all timeframes and still below its 100 and 200 DMAs, it needs more juice to the
upside to warrant any opinion that a low has been made. However, if a recovery
is in the works, it would help equities.
GLD finally showed a bit of weakness, bouncing
lower off the upper boundary of its very short term uptrend (not that surprising
or alarming). It did also push through its 50 DMA---a first potential sign of
weakness. It remains above its 100 and 200 DMAs and it uptrends across all
timeframes. So like TLT, we need to see more directional momentum before
assuming change in trend.
Gold tends snaps.
https://www.zerohedge.com/the-market-ear/golds-trend-snaps-cheap-options-and-looming-cta-liquidation
Goldman on gold.
https://www.zerohedge.com/precious-metals/goldman-gold-tactical-downside-protection-structural-upside
The dollar failed its attempt at a rally and then
made a lower low, nixing any thought of a rally.
Friday in the charts.
https://www.zerohedge.com/market-recaps/stocks-bonds-bitcoin-jump-gold-oil-dollar-dumped-during-dismal-data-week
Friday in the technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/sectors/rankings
Fundamental
Headlines
The
Economy
Lots of data last week. The indicators were
balanced. Although the primary indicators were quite negative (two plus, one neutral,
six minus---two of which were price related).
Overseas, the numbers were roughly balanced with
only one inflation related indicator which was neutral.
Given the poor primary indicators in the US, I have
to give the overall performance a negative rating. That make two weeks in a row
and lifts the warning level to my ‘muddle through scenario. On the other hand,
the lousy inflation stats veered back towards my ‘inflation is as good as it is
going to get’ forecast.
Muddying everyone’s outlook are (1) the
Trump/Powell standoff [i think that we need at least one more FOMC meeting
before altering monetary policy], (2) the horrendously awful [fiscally
irresponsible] big, beautiful bill, (3) the outcome of the new tariff policy not
only on economic growth but also on inflation [although it appears that it will
be less onerous than it could have been] and (4) the fallout from the US attack
on Iran [I know everything seems to be coming up roses right now but I am still
worried about ‘unintended consequences’].
Bottom line. Short term, the odds of recession are
increasing ever so slightly, though I remain in the ‘muddle through’ camp.
https://econbrowser.com/archives/2025/06/business-cycle-indicators-the-slowdown-cometh
A warning.
https://bonddad.blogspot.com/2025/06/may-personal-income-and-spending.html
Longer term, current fiscal policy remains a major
negative---as our ruling class debates details of the big, beautiful bill while
leaving the overall bottom line (i.e., larger deficits, more national debt) unchanged.
Which means slower growth and higher inflation.
https://www.realclearpolitics.com/articles/2025/06/25/debt-financed_splurges_are_a_dead_end_152952.html
As I noted above, there are plenty of factors that
can turn my forecast on its head. So my conviction level is low.
That said, stocks love to climb the proverbial ‘wall
of worry.’ Plus July is historically a
good month for stock prices. That leaves me on the sidelines until the outlook
becomes clearer.
US
International
Q1 UK GDP grew 0.7%, in line; Q1 business
investment was up 3.9% versus +5.8%.
May Japanese industrial production rose 0.5% versus
consensus of +3.5%; May YoY housing starts were down 34.4% versus -14.9%; May
YoY construction orders were up 14.0% versus +18.0%.
May German retail sales fell 1.6% versus projections
of +0.5%; June preliminary CPI came in at +0.1% versus +0.3%.
The June Chinese manufacturing PMI was 49.7, in
line; the June nonmanufacturing PMI was 50.5 versus 50.3; the June composite
PMI was 50.7, in line.
Other
Corporate
profit explosion stalls.
https://wolfstreet.com/2025/06/26/the-corporate-profit-explosion-stalls-in-q1-on-the-eve-of-the-new-tariffs/
Update on big four recession indicators,
https://www.advisorperspectives.com/dshort/updates/2025/06/27/recession-indicators-real-personal-income-may-2025
Real disposable income down in May.
https://www.advisorperspectives.com/dshort/updates/2025/06/27/real-disposable-income-per-capita-down-may-2025
Update on Q2 nowcast.
https://talkmarkets.com/content/us-markets/gdp-nowcast-dispersion-plus-slowing-final-sales-to-private-domestic-purchasers?post=506398
Overnight
News
Congressional Budget Office said the Senate version
of the Trump tax bill will add USD 3.3tln to US debt over the next decade.
Elon Musk posted on X that the latest Senate
draft bill will destroy millions of jobs in America and cause immediate
strategic harm to the country, while he added it is utterly insane and
destructive, as well as gives out handouts to industries of the past while
severely damaging industries of the future.
Trump floated the idea of keeping 25% tariffs
on Japan’s cars as talks between the two nations continued with little more
than a week to go before a slew of higher duties are set to kick in if a trade
deal isn’t reached.
South Korea sees the need for trade
negotiations with the US to continue past next week’s deadline as Seoul
continues to seek exemptions from US tariffs including duties affecting the
auto and steel industries.
Ukraine said Russia fired a record 537
missiles and drones yesterday, targeting seven regions. Meanwhile, Vladimir
Putin expanded the range of information covered by a state secrecy law.
France’s finance minister said the EU can
clinch some form of trade agreement with the US before a July 9 deadline.
Iran said it doubts the US-brokered ceasefire
with Israel will last and warned of a firm response to any aggression.
Meanwhile, an intercepted call showed Tehran felt the strikes on its nuclear
program were less damaging than expected.
Fiscal
Policy
Senate
passes big, beautiful bill.
https://www.zerohedge.com/political/senate-republicans-revise-trump-tax-bill-win-over-holdouts-eye-july-4-passage
Tariffs
Apparently,
we have a deal with China.
https://www.bloomberg.com/news/articles/2025-06-27/china-says-it-confirms-trade-framework-details-with-us?srnd=homepage-americas&sref=loFkkPMQ
Canada scraps digital services tax.
https://www.zerohedge.com/political/canada-scraps-digital-service-tax-us-tech-giants-revive-trade-talks
Investing
The latest from BofA.
https://www.zerohedge.com/markets/hartnett-these-are-best-trades-second-half-2025
News on Stocks in Our Portfolios
What I am reading today
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