The Morning Call---the end of cheap capital

 

The Morning Call

 

6/24/26

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/us-tech-trounced-bonds-bid-korean-butterfly-flaps-its-wings

 

Summary: Oil oscillations took a back seat to Korean carnage today as the flapping of levered ETF  butterflies triggered a tornado in US big-tech (led by Semis), dragging down Nasdaq (Dow green though). Heavy negative delta 0-DTE flow today. Bonds (mixed macro) and the dollar were bid as Bitcoin and bullion were dumped again. The question on everyone's lips: Are levered Korean retail traders the US Tech boom Giant killer? It was a soft-data tsunami today (and the picture was anything but clear): Philly Fed Services ugly (and contracting), Richmond Fed Manufacturing and Business Conditions ugly (and contracting), but US Composite PMI jumped to 5 month highs led by Manufacturing (at 49-month highs) amid signs of price pressures cooling. ADP's weekly employment indicator remains near its highs though as labor remains resilient. Still, it continues to be NOT about macro as stocks and bonds decouple from any head- or tail-wind from oil...

 

Finally, Apollo's Chief Economist, Torsten Slok, lays out the top three macro questions for traders at the moment:

1) Middle East: What are the implications if some tanks reach critical levels somewhere in the world, including distillate fuels in the US? 

2) AI: What happens if companies start limiting their token budgets meaningfully because they are only seeing weak ROI, and as a result, compute demand either slows down or shifts to Chinese models? 

3) Inflation outlook: With inflation trending higher, what are the implications for equity and credit markets if the Fed hikes in September and December, as currently priced in fed funds futures? 

The answer in all these cases is not straightforward but we would say that the market remains more than willing to look past all these potential pitfalls... until now. Is this week's decline a canary in the coalmine? And will Korea's flapping butterfly wings chaotically trigger a global delivering in the chase for bottlenecks?

And just to rub some salt in that wound, buybacks ain't gonna save you this time (and not just because hyperscalers FCF is negative):

 

Tuesday in the technical stats.

https://www.barchart.com/stocks/momentum

https://www.barchart.com/stocks/market-performance

https://www.barchart.com/stocks/sectors/rankings

https://www.barchart.com/stocks/signals/new-recommendations

 

 

 

            The AI trade is getting uncomfortable.

            https://www.zerohedge.com/the-market-ear/ai-trade-getting-uncomfortable

 

Summary: The AI trade is starting to look crowded in all the right places and vulnerable in all the wrong ones. Tech volatility is exploding, systematic flow risks are building and the market continues to reward the suppliers while punishing the spenders. Nothing is broken yet, but the rubber bands are getting stretched. The market continues to reward AI suppliers while punishing AI spenders. Semis, memory and infrastructure have captured the upside, while hyperscalers face growing questions around returns and capex intensity.Meanwhile, increasingly capable models are emerging from the East at a fraction of the training cost incurred by Western AI leaders. Yet the entire AI ecosystem remains priced for ever-rising capex. Nobody is positioned for "slightly less." The figures are starting to get uncomfortable. Projected selling from options-related flows, leveraged ETFs and vol-control funds is becoming absolutely massive.

 

How far can the rubber band get stretched?

https://www.zerohedge.com/markets/how-far-can-rubber-band-stretch-goldman-1-delta-desk-says-breaking-point

 

Summary: The breaking point was always likely to be when one of the major spenders concludes that shareholder returns are better served by spending slightly less. The problem is that “slightly less” is not embedded in anyone’s assumptions.The entire AI complex is priced for ever rising capex as inference demand grows. The Nasdaq appears to have failed to make a decisive new high.At the same time, there are increasingly visible issues surrounding the largest market-cap companies in the world.That feels like an unstable equilibrium.

We are through the tailwinds of last week’s expiry and now have line of sight into month-end and quarter-end rebalancing flows, which in theory should favor selling equities and buying bonds. Market structure is also becoming less supportive.Dealer gamma is lower around current spot levels and declines further on the way down.CTAs are still buyers on many measures but remain highly convex to the downside. A glance at the prime brokerage numbers largely confirms what price action is telling us: the world has become one exceptionally concentrated trade.AI is driving the equity market, the equity market is driving economic expectations, and all roads increasingly lead back to the same handful of stocks. Risk that the market has been ignoring the highly deflationary forces in token economics.

 

Wednesday morning setup; US stocks are set for a rebound with equity futures higher as Semis and Tech stage a partial recovery from yesterday’s "Chip-Wreck" as KOSPI retraced about 20% of its losses ahead of earnings from the single-biggest contributor to US outperformance this year: Micron’s third-quarter numbers are an even bigger deal than usual, following Tuesday’s shakeout of an overcrowded AI trade that’s has been priced for perfection. As of 8:00am ET, S&P 500 futures are 0.3% higher with Nasdaq 100 contracts up 0.5%. In premarket trading, equities are boosted by a bid for Semis (MU +3.6% with earnings tonight) with most of Mag7 higher. Within Cyclicals, Discretionary and Industrials are the standouts as Energy / Fins are mostly lower. Cyclicals poised to lead Defensives with Momentum factor flat. Bond yields are lower 1-2bp as the yield curve flattens, pushing 10Y yields; USD remains bid even as real yields decline. DXY set a new 52-wk high today. Cmdty remain under pressure dragged by the Energy complex and weakness in Metals. Today’s macro data focus is on Home Sales ahead of tomorrow's update on GDP, PCE, Personal Income / Spending, Cap / Durable Goods, and weekly Claims.

 

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications rose 1.0% while purchase applications declined 1.0%.

 

Month to date retail chain store sales were up 10.0% versus +9.4% in the prior week.

https://bonddad.blogspot.com/2026/06/consumer-spending-has-turned-red-hot.html

 

The June flash manufacturing PMI was 55.7 versus estimates of 54.5; the flash services PMI was 51.3 versus 51.0; the flash composite PMI was 52.2 versus 50.8

 

The June Richmond Fed manufacturing index was 4 versus expectations of 9.

                          https://www.advisorperspectives.com/dshort/updates/2026/06/23/richmond-manufacturing-index-flat-activity-in-june

 

                        International

 

The June German business climate index came in at 85.6, in line; the June current conditions index was 87.0 versus 86.4.

 

 

                        Other

 

            Overnight News

 

The US Senate voted 50-48 to pass a resolution to halt the Iran war unless US President Trump gets approval from Congress. However, the White House said Congress resolutions on Iran are non-binding and won't be sent to President Trump, while Trump criticized the Senate passage of the Iran war powers resolution, which he claimed provides aid and comfort for the enemy.

 

The BoJ sees the risk of inflation exceeding its 2% target and will conduct additional interest-rate hikes appropriately, Governor Kazuo Ueda said in speech Wednesday that reiterated policymakers’ recent messaging

 

            Iran

 

The first tango in Lake Lucerne.       https://x.com/JoshBlockDC/status/2069047098813690054?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E2069047098813690054%7Ctwgr%5E0924bdd8e9caa093d89c2e70ad43737050772d7e%7Ctwcon%5Es1_c10&ref_url=https%3A%2F%2Fwww.powerlineblog.com%2Farchives%2F2026%2F06%2Ffirst-tango-at-lake-lucerne.php

 

              Ukraine, Iran and Occam’s Razor.

              https://danieldrezner.substack.com/p/ukraine-iraq-and-occams-razor

 

            Monetary Policy

 

Real Treasury yields rise above 2%.  Is the Market doing the Fed’s job? (if it is, that is good news since the Fed has done a horrible job)

https://www.capitalspectator.com/real-yields-rise-above-2-is-the-market-doing-the-feds-job/

 

            Fiscal Policy

 

              Debt hawks ignore history.

              https://www.realclearmarkets.com/articles/2026/06/23/national_debt_hawks_write_as_though_1981-present_didnt_happen_1189832.html

 

            The Financial System

 

              Apollo caps private credit fund withdrawals.

                          https://www.bloomberg.com/news/articles/2026-06-22/apollo-caps-private-credit-fund-again-after-17-request-to-exit?srnd=homepage-americas&sref=loFkkPMQ

 

Summary: Apollo Debt Solutions, which has roughly $25 billion in assets, capped withdrawals at 5% of outstanding shares on Monday after investors asked to redeem 16.8%, according to a shareholder letter. Redemption requests in the quarter were higher than the 11.2% investors wanted to pull in the prior period. Cliffwater LLC faced requests to pull 17% of shares from its flagship fund, while BlackRock Inc. received about 13% earlier this month. Both funds enforced a 5% cap for such funds, known as business development companies.

 

     Investing

 

            Can tech stocks keep outperforming?

            https://alhambrapartners.com/weekly-market-pulse-markets-review/?src=news

 

            This analyst thinks they can.

            https://www.riskhedge.com/outplacement/the-biggest-ai-investing-mistake

 

            Tech companies getting money while the getting is good.

https://www.theatlantic.com/ideas/2026/06/spacex-ipo-tech-companies/687659/?gift=TGgP34XZPBAppowZPOH7p09v5u9RMSdtIPhTWqBNljQ&utm_source=copy-link&utm_medium=social&utm_campaign=share

 

 

            The end of cheap capital.

            https://hbr.org/2026/06/the-end-of-cheap-capital

 

            The S&P’s latest changes in its composition.

            https://www.carsongroup.com/insights/blog/the-sp-500s-latest-changes-ai-in-consumer-out/

 

            How much of the S&P 500’s revenues come from overseas?

            https://talkmarkets.com/article/how-much-of-the-sp-500s-revenue-comes-from-overseas-1782232562

 

            Spotting bubbles and calling tops.

            https://awealthofcommonsense.com/2026/06/spotting-bubbles-and-calling-tops/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

The Morning Call---Korea crashes

 

The Morning Call

 

6/23/26

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/tech-wreck-trumps-iran-deal-optimism-bitcoin-bullion-bid

 

Summary: Any tailwinds from lower oil prices (US-Iran deal progress) were quickly eviscerated by Tech weakness ('cheap' China/Japan models and DeepMind departure, and SaaSpocalypse 2.0). Bond yields (higher) also ignored lower oil (heavy IG calendar), helping dollar gains. Bitcoin and bullion gained on the day. As Goldman's Chrish Hussey noted, markets adopted a defensive posture on Monday as they revisit the AI trade and contemplate the evolving geopolitical landscape following a long weekend in the US. Stocks and bonds completely ignored oil's demise to last week's lows... .it appears oil's potential (decline) as a tailwind for risk may be over.

 

                        Monday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/market-performance

            https://www.barchart.com/stocks/sectors/rankings

            https://www.barchart.com/stocks/signals/new-recommendations

 

            Warsh credibility a new volatility suppressant.

            https://www.zerohedge.com/markets/warsh-credibility-new-vol-suppressant

 

Summary: A pivot to a more appropriate policy stance is acting as a volatility suppressor. That’s why I push back on some market particpants' take that equities and bonds will be hurt by this policy pivot. A prudent, methodical tightening cycle that lowers inflation expectations and establishes the Warsh Fed’s credibility should keep discount rates anchored and reduce volatility by limiting the risk of a sharper, more panicked hiking cycle later. In that world, a broader risk rally remains the modal outcome, with breadth expanding beyond higher-beta AI momentum names as stable economic backdrop and productivity-driven earnings gains lift all ships. Pullbacks will come, as they always do, but they should be contained as the S&P 500 builds ranges, breaks into higher ones on positive catalysts and melts upward on stronger fundamentals and greater Fed credibility.

 

            When flows meet a hawkish Fed.

            https://www.zerohedge.com/markets/technical-backdrop-when-flows-meet-hawkish-fed

 

            This is the worst time for a flood of retail money.

            https://www.zerohedge.com/markets/worst-time-flood-retail-money

 

Summary: Retail inflows to semis stocks are hitting records as excess liquidity is in its weakest state since the 2021 inflation shock. That’s because no matter the galactic aspirations and expectations held for these firms, their stocks’ success is governed by more prosaic considerations, namely liquidity. Excess liquidity, the difference between real money growth and economic growth, is negative and falling for the first time since the pandemic inflation shock five years ago. Inflation and economic growth are absorbing money growth from the system, leaving less for supporting risk assets. Indeed, with excess liquidity negative, we are at the point where the real economy will de facto need to extract liquidity from the market to remain supported (on a trend basis). This is the worst time for the late flood of retail money, which is much more likely to show a loss as the market drops from overbought conditions, and with no excess liquidity left to provide support. Money last in is often first out.

 

            Korea crashes.

            https://www.zerohedge.com/markets/korea-crashed-goldman-explains-what-happened-and-why-it-matters

 

Summary: the rally had become increasingly dependent on a narrowing set of marginal buyers, and that support base was vulnerable to reversal as institutional capacity tightened and technical enthusiasm encountered fresh headwinds. Put differently, today’s selloff matters not only because of its magnitude, but also because of what it suggests about market structure. When a market rises despite heavy foreign selling, the natural question is who remains to absorb incremental supply. My conclusion last week was that institutional buying power was becoming more limited, leaving retail as the key residual source of demand. Today’s price action appears broadly consistent with that view. As pensions became a more visible source of supply and investors moved to de-risk ahead of Micron earnings, the imbalance became more apparent.

 

Tuesday morning setup: US equity futures are sharply lower as a Semis/South Korea-induced selloff has spread globally slamming tech stocks and pushing SpaceX 3% lower and below its first day of trading price of $150. Nasdaq stocks lead sentiment and early trading lower with AI cost concerns back in focus, as Bloomberg notes that traders are pointing to a South Korean media report we first highlighted at 8pm last night, saying SK Hynix is slowing expansion of AI memory chip production and shifting emphasis to commodity DRAM. As of 8:00am S&P futures were -1.3%, and Nasdaq futures tumbled 2.7%, both near session lows. In premarket trading, Intel and Micron led a broader decline among chipmakers while SpaceX fell 4.3%, below its $150 initial trade price. Chinese equities in Hong Kong entered a bear market. Mag7s are dragging the indices lower with MSFT / telecom the safety valve. In Seoul, chip giants SK Hynix Inc. and Samsung Electronics Co. slumped more than 10%. According to JPM, today's sell-off "may reflect anxiety into MU’s print on Weds as well as the levered ETF mkt structure." Bonds are operating as a safety haven as the yield curve bull steepens, and USD is bid. Commodities are seeing further declines in Energy as US / Iran discussions continue and precious metals are getting hit due to USD (gold) and AI / Tech (silver). Ags are mixed. Today’s macro data focus is on Flash PMIs, ADP’s weekly employment print, and regional Fed activity indicators. 

 

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                        International

 

The June Japanese flash manufacturing PMI was 54.9 versus forecasts of 54.5; the flash services PMI was 51.8 versus 50.3; the flash composite PMI was 52.5 versus 50.9; the June German flash manufacturing PMI was 50.0 versus 50.5; the flash services PMI was 42.8 versus 49.0; the flash composite PMI was 48.0 versus 49.9; the June EU flash manufacturing PMI was 51.3 versus 51.6; the flash services PMI was 48.9 versus 48.5; the flash composite PMI was 49.5 versus 49.1; the June UK flash manufacturing PMI was 53.1 versus 53.8; the flash services PMI was 48.7 versus 50.5; the flash composite PMI was 49.4 versus 50.6.

 

The June UK industrial trends orders index was -48 versus projections of -35.

 

 

 

 

                        Other

 

                          The consumer sentiment disconnect from economic reality.

                          https://www.advisorperspectives.com/commentaries/2026/06/22/consumer-sentiment-disconnect-economic-reality

 

                          Update on Q2 GDP nowcast.

                          https://www.capitalspectator.com/q2-gdp-nowcast-steady-at-2-5-as-us-iran-talks-progress/

 

                          The outlook for oil prices.

                          https://talkmarkets.com/article/what-now-for-crude-oil-as-peace-efforts-continue-1782145317

 

                          A ‘quick and dirty’ forecasting method.

                          https://bonddad.blogspot.com/2026/06/the-quick-and-dirty-forecasting-method.html

 

            Iran

 

              Overnight news.

              https://www.zerohedge.com/geopolitical/iran-says-us-unfreeze-12bn-insists-it-alone-will-decide-how-funds-be-used

 

              And.

                  https://www.zerohedge.com/geopolitical/israel-sets-3-key-conditions-ending-occupation-south-lebanon

 

              Another perspective on the Iran deal.

              https://townhall.com/columnists/kurtschlichter/2026/06/22/some-real-talk-about-the-iran-deal-n2678042

 

Of course, it is hard to have valid perspective when no one can agree on what the memo of understanding says.

https://www.zerohedge.com/geopolitical/iran-agrees-invite-nuclear-inspectors-back-vance-hails-great-progress-after-little

 

            Monetary Policy

 

              The era of ‘Powell is dovish’ is over.

              https://wolfstreet.com/2026/06/18/era-of-powell-was-dovish-is-over-warshs-five-taskforces/

 

              Ed Yardini’s take on the new Fed chair.

              A Hawk In Dove's Clothing ... June Swoon Is Back ... 'We Have A Task Force On That'

 

            Fiscal Policy

 

              Fixing social security.

              https://www.advisorperspectives.com/commentaries/2026/06/22/social-insecurity-edition

 

            Inflation

 

              Fertilizer prices tumble.

              https://www.ft.com/content/e13f54a4-433c-4ab8-a70a-a38c7279de92?syn-25a6b1a6=1

 

Summary Nitrogen fertilizer prices have slumped from record highs hit during the Iran war even before ships have begun moving freely through the Strait of Hormuz, as traders increasingly bet the worst of the Middle East supply shock is over. Benchmark Middle East urea prices have fallen about 50 per cent to $475 a tonne from their April peak of $918 a tonne, according to commodities data firm Argus, dropping to prewar levels despite continued disruption to trade through one of the world’s most important export routes. Not all fertiliser prices have fallen, however, with phosphate fertilisers in short supply due to a sustained surge in the price of sulphur. About 50 per cent of global food production depends on artificial nitrogen-based fertiliser, of which urea is the most widely used.

 

            Recession

 

              Goldman cuts recession odds to 10 %.

              https://www.zerohedge.com/markets/goldman-cuts-recession-odds-10-25-despite-expecting-big-slowdown-payroll-gains

 

Summary: In a note published earlier today (available to pro subs), Goldman chief economist Jan Hatzius writes that "the agreement between the US and Iran has reduced the downside risks to our economic outlook." As we reported last week, the bank's commodities strategists now see Brent at $80 per barrel by the end of 2026, the second price target cut in a week. That said, Goldman still sees two-sided risks for the price of oil: on the upside, Iran's announcement on Saturday that the Strait was closed again served as a reminder that oil flows might only recover slowly. On the downside, a near-term glut could develop as oil is released quickly into a market that was already oversupplied before the war. More importantly, the agreement has prompted Goldman to cut its 12-month US recession risk estimate further from 25% to the long-term norm of 15% (below the bank's 20% estimate on the eve of the war "because the labor market improvement since then indicates greater underlying resilience.")

                                                                                                                       

 

            AI

 

              All the money flooding into AI is a warning signal.

                          https://www.wsj.com/finance/stocks/all-the-money-flooding-into-ai-is-a-giant-warning-sign-6e08e3ea?st=jNsqDf&reflink=desktopwebshare_permalink

 

            Tariffs

 

              New Trump tariffs shakes up the winners/losers list.

  https://www.bloomberg.com/news/articles/2026-06-22/trump-builds-a-new-us-tariff-wall-in-shakeup-of-winners-losers?srnd=homepage-americas&sref=loFkkPMQ

 

Summary: President Donald Trump's administration is rolling out new tools with the same protectionist goals after the Supreme Court ruled his sweeping global tariffs to be illegal. Many countries are subject to investigations under accusations of trade unfairness, with some countries standing to gain a competitive edge with a lower tariff rate and others potentially ending up worse off. The new tariff wall may benefit countries like the Philippines, South Africa, and smaller economies, while countries like Singapore may be left in a worse position, and the impact on countries like Canada, Mexico, the European Union, and China is still uncertain.

 

 

     Investing

 

            What is wrong with this picture?

            https://www.apollo.com/wealth/the-daily-spark/the-market-is-paying-a-premium-for-companies-that-lose-money

 

            Tech stock climax.

https://smeadcap.com/missives/tech-stock-climax/?utm_campaign=Missives&utm_medium=email&_hsmi=424308866&utm_content=424309450&utm_source=hs_email

 

 

            The bond market sell off.

              (4) Bond Market Sell Off: Welcome To The “Titanic Effect”

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Monday Morning Chartology. Plus lots to digest.

 

The Morning Call

 

6/22/26

 

 

The Market

         

    Technical

 

The S&P is attempting to regain its upside momentum on the back of the hope for a US/Iran deal. That said, it failed in its first attempt and is currently in a slight very, very short term downtrend. On the plus side, the index (1) remains above all three DMAs and (2) is in uptrends across all timeframes. Further, the (1) economy continues to perform, (2) the latest Trump/Iran deal [?] is being viewed by investors as at least a short term plus [I think that open to question; but as long as the Market believes it, my opinion is worth butkus]  and (3) with one huge IPO down and two to go, I can’t believe that the Wall Street bankers are going to allow the Market to go down ahead of these offerings.

 

But with a potentially more hawkish Fed and the Market at a very generous valuation, I am somewhat skeptical of just how jiggy to get.

 

Watch the follow through for this recent rally. If the Market regains its former highs, that is great---I will stay invested, but I am now questioning whether to add to my holdings—'questioning’ being the operative word. If the Market goes on to make a new lower low, I will likely take some money off the table---some of my semiconductor holdings are well into their Sell Half Range and I have delayed making those sales because of their strong upside momentum.

 

Patience.

 

                       

 

 

I was a bit surprised by the long bonds reaction to the more hawkish tone coming out of the FOMC meeting. After all, tighter monetary policy usually produces higher rates. On the other hand, recall when the Fed started its rate cutting program (lower rates) the long bond sold off on fears of inflation. The opposite may be happening now---TLT rallying on hope of a more responsible monetary policy. However, it seems a bit early in the game to me for investors to be getting jiggy about a better inflation environment since (1) we don’t even know if Warch was serious, (2) whether the rest of the FOMC membership will go along and (3) even if they do, how hard they are willing to press on the monetary brakes and how long it will take to break the current inflation psychology.

 

What we know now technically speaking is that (1) the long bond bounced off support, (2) it reset its 50 DMA to support and is now challenging its 100 DMA [now resistance] and (3) appears to have made reverse head and shoulders [a plus].

 

 

 

The least surprising pin action of the week goes to gold. It remained in a well-defined downtrend; it is below all three DMAs; and gold historically hates a strong dollar and higher interest rates (the aforementioned TLT performance notwithstanding, short rates were up)

The dollar was strong again last week on the Fed news and appears to be developing a very short term uptrend. If Warsh is the real deal, then my previous stance on the dollar (weak and stays weak) will likely soon change.

Friday in the charts.

https://www.zerohedge.com/markets/hormuz-hopes-trump-warsh-worries-long-weekend-stocks-bonds-bounce-bitcoin-bullion-bruised

 

Summary:  New Fed Chair Kevin Warsh woke up to good news as a signed MOU and the resumption of Hormuz flows pushed oil prices down and took the market's mind off a hawkish Fed (stocks and bonds retraced yesterday's losses). The dollar kept rising (on the back of ugly Yen weakness), dragging down gold and bitcoin. OpEx removed some stabilizers for next week after long-weekend. Trump cheered via TruthSocial: "OIL IS FLOWING... STOCK MARKETS ARE ROARING... YOU'RE WELCOME!" Goldman Sachs Partner summed up the state of play in equities very succinctly: continue to feel that this market is narrow and concentrated with one factor (momentum) and one theme (ai power/compute/memory) driving the bus and overcoming every challenge it has faced thus far.

 

 

Friday in the technical stats.

https://www.barchart.com/stocks/momentum

https://www.barchart.com/stocks/market-performance

https://www.barchart.com/stocks/sectors/rankings

https://www.barchart.com/stocks/signals/new-recommendations

 

June option expiration will weaken Market stability.

https://www.zerohedge.com/markets/june-option-expiration-will-weaken-equity-market-stability

 

Summary: SpotGamma highlighted net negative delta flows came mostly from put buying, with traders adding downside hedges rather than simply closing calls.Implied volatility measures confirmed the move, with the VIX and the VVIX -- or “vol of vol” -- climbing in tandem. While the June options expiry isn’t bearish in and of itself, it’s a large call-heavy expiration rolling off after the Fed already damaged the positive-gamma backdrop. That leaves equities with less insulation as traders debate whether Warsh’s Fed means tighter financial conditions and weaker risk appetite heading into the summer months.

 

The most technically important period of the year.

https://www.zerohedge.com/markets/most-technically-important-period-year-markets-citadel-securities-sees-3-key-themes

 

Summary: We expect the next two weeks to be dominated by flows, not fundamentals. The market is about to absorb the largest options expiration in history, quarter-end pension rebalancing, and a significant reset in positioning across major investor cohorts. Any resulting weakness should be viewed through a technical lens.Looking beyond quarter-end, the setup remains favorable.Retail demand is at record highs, ETF inflows continue to accelerate, corporate buybacks remain robust, and the market is entering one of its strongest seasonal periods of the year. We continue to believe the path of least resistance is higher as markets transition into the second half of the year.

 

Something doesn’t add up.

https://www.zerohedge.com/the-market-ear/something-doesnt-add-0

 

Summary: Bond volatility is collapsing because the rates market sees fewer macro uncertainties. Tech volatility remains elevated because uncertainty has migrated from the economy to the AI buildout itself. Still just a short-term divergence, but it is unusual to see equities ignore such a sharp decline in bond volatility. The chart below shows the S&P 500 versus inverse MOVE. Historically, lower bond volatility and higher equity prices tend to go hand in hand. So far, stocks have not fully embraced the message from rates vol.Divergences like these rarely persist. Either bond volatility is wrong, or other markets have yet to catch up. MOVE has a habit of leading. The question is not why bond volatility is collapsing. The question is why so many other markets are refusing to believe it.

 

 

Monday morning setup: Futures are modestly lower coming off the US holiday weekend, after equities finished higher last week with both Dow and Russell clocking new ATHs and SPX finishing in the green for the 11th time in the last 12 weeks. As of 8:00am ET, S&P 500 futures edged down 0.1% while Nasdaq 100 contracts are higher by 0.1% with chips outperforming as usual while hyperscalers, aka "check payers" down as all Mag 7 are lower with TSLA (-1.4%) and GOOGL (-1.6%; Google’s DeepMind VP John Jumper is leaving the company to join Anthropic) being the biggest laggards. Overseas, Asian markets mostly higher overnight with China and Japan the big gainers, up over 1.5%. European markets higher, up ~0.3%. Big development over the weekend revolved around US-Iran talks in Switzerland, where both sides ultimately highlighted progress following some earlier headline noise. Donald Trump again threatened strikes on Iran if Hezbollah keeps attacking Israel, & US and Iran set up a communication line to avoid incidents and ensure safe passage of shipping through the Strait of Hormuz. In the UK, PM Keir Starmer announced his resignation outside 10 Downing Street. The pound erased losses after briefly touching a 2026 low, while gilts rallied as an orderly leadership transition took shape. Bond yields are 2-4bp higher, while the USD is largely unchanged. WTI crude fell $-0.58 to $75.27 reversing all earlier gains while Brent traded around $79. Gold and silver are higher as is bitcoin. There is little on the corporate calendar and scant macro data, leaving traders with little direction until Micron’s earnings due Wednesday and the Fed’s preferred inflation gauge on Thursday take center stage. Fed speaker slate includes Waller at 9am; Williams, Goolsbee, Kashkari and Barkin speak later this week.

 

 

    Fundamental

 

       Headlines

 

              The Economy

 

The US stats last week were balanced though the primary indicators were slightly negative (one plus, two minus) with no inflation numbers. Overseas, the data was tilted positive with two plus, one neutral and one negative price measure.

 

Subjects of the week.:

 

A.    inflation, in particular long term inflation. The reason is obvious---last week’s FOMC meeting, statement and presser in which both the FOMC statement as well as Warsh’s presser were more hawkish than most (I) expected.

 

      First, two caveats.

 

(1) one statement/presser does not a policy change make. The proof in the    pudding is in the eating. Warsh could simply be attempting to jawbone inflation expectations down. Plus, he has only one vote. So until we see a concerted effort by the Fed to truly alter the current regime of monetary accommodation, skepticism is warranted, 

 

(2) along those lines, Warsh is a Trump appointee. Trump is an avid easy money advocate. We don’t know what those two discussed that earned Warsh his appointment. But it is hard to believe that Warsh would totally deceive Trump regarding his intentions with respect to monetary policy. Which leads me to the conclusion that either [a] Warsh is sounding tough but unlikely to follow through on policy or [b] Trump doesn’t care what happens after the November election since he can’t run and conceded to Warsh the need to combat inflation. Which leaves what happens next a major uncertainty.

 

However, if we assume (the operative word) that Warsh means what he said, then history suggests a couple of likely outcomes.

 

(1) the Market hates tight money because [a] higher interest rates increase the rate of return bogey that stocks must meet in any discounted value return equation, i.e., it lowers relative equity value, and [b] it reduces liquidity which the stock market needs to support higher valuations. Which means the Market in likely in for a rough ride and

 

          The squeeze on liquidity is just getting started.

          https://www.zerohedge.com/markets/squeeze-liquidity-just-getting-started

 

Summary: In fact, wherever we look we see signs of rates getting tighter. They have started to rise around the world as war inflation seeps into the global economy. A diffusion index of central bank rate hikes (the Global Financial Tightness Indicator in the chart below) has started to fall, indicating tighter conditions. But it could just be getting going. A diffusion of global rate futures shows there is a lot more tightening in the pipeline as higher rate expectations build. And there is tightening at the longer end of the curve too. My leading indicator for 10-year real yields, based on excess liquidity, the Fed’s policy rate and the diffusion of central-bank rates as above, shows they should rise over the next 3-4 months. There are tighter conditions wherever you look. We might guess all of this will be bad for stocks, and we’d be correct. There is almost a straight line relationship with equities and excess liquidity. Progressively more negative excess liquidity is associated with progressively worse stock returns over the ensuing 3-6 months. And excess liquidity is set to keep falling. The measure is defined as money growth less inflation less economic growth across the G10. Money growth is still contributing positively, but elevated inflation and a pick-up in growth, especially in the US, is now consuming money’s contribution in its entirety. That means there is no liquidity available that is “excess” to support risk assets, and before long liquidity will need to come out of the market to maintain growth in the real economy. SpaceX euphoria or not, markets can’t keep going up if the liquidity isn’t there.

And don’t forget, there will be more competition for what there is. Net equity supply just turned positive for the first time since 2021 — and has a good likelihood of staying supported due to a surfeit of issuance and fewer buybacks than expected — posing a structural headwind for stocks. It’s thus turning into an increasingly hostile environment for the equity market. Yet none of this is deterring retail traders, with US equity ETFs showing their second highest inflow on a monthly basis this week, finally parking the hesitancy that had kept them at bay through the war. Retail is typically the last group into the rally, driving the market into a mania phase and a blow-off top. If history repeats, it’s set to be a costly, very bumpy ride.

 

(2) it sets up an inevitable clash between monetary and fiscal policy. In short, if there is less money in the system---

 

[a] there is less money to finance the deficit and that means the government will likely have to pay more to finance that deficit {i.e., higher interest rates which as I noted above, the Market hates} and

 

[b] since the government HAS TO finance its deficit, it will ultimately crowd out the rest of the economy’s need for funds, most importantly corporate investments in plant, equipment and R&D that sustains economic growth.

 

The $64,000 question is how our ruling class responds to this. If they do the right thing and curb spending growth, the economy continues to grow but with less inflation. If they don’t, then either the monetary officials cave and we are back on the same track (higher inflation, higher growth) or they don’t and we are on a slower growth, low inflation trajectory. Neither of which is what we want.

 

The bottom line is if Warsh is the second coming of Volcker, both the economy and the Market are in for the pain necessary for correcting the excesses of the past. If he is bulls**ting us, then inflation is as good as it is going to get (lower oil prices will certainly help in the very short term---see below), the economy will continue to grow but at a slower secular rate than in the past and the Market will likely continue to award excessive valuations to equities until someone recognizes that the emperor has no clothes.

                                https://www.capitalspectator.com/data-vs-debate-will-the-bond-market-embrace-warshs-new-tone/

 

B.     the end of the war (?). The problem with addressing this issue is that the circumstances change minute to minute. Even when the Donald says that we have deal, there isn’t one (his has done that 39 times). But let’s assume for the moment that there is one, the major economic impact will be on oil and its downstream by products. The problem here is that there is wide disagreement about how long it is going to take to return to normal---assuming normal is the return to the ex-ante conditions in the Strait of Hormuz---which is probably never going to happen now that Iran knows it can close Hormuz anytime it wants. Still, in the short run, if there is a deal, oil will flow and undoubtedly decline in price (although again there is widespread disagreement about just how much). So we have to count that as a positive for growth as well as inflation. But how positive?

 

Bottom line: I have no clue and neither does anybody else. So the best we can be is cautiously optimistic. That said, unless we get wildly lucky, I can’t believe this will slow a tightening in monetary policy in the short run. Again if we get lucky it could mean less tightening for a shorter period. But we won’t know that for a while. And yet, investors juice the stock prices every time there are positive headlines even though it has happened 39 times before with no result and even though the Market is higher than it was before the war started. So color me underwhelmed.

                  

                        US

 

                        International

 

                        Other

           

                          Update on big four recession indicators.

                          https://www.advisorperspectives.com/dshort/updates/2026/06/17/the-big-four-recession-indicators

 

                          Both business expansion and inflation have continued in June.

                          https://bonddad.blogspot.com/2026/06/preliminary-evidence-that-both-business.html

 

            Iran

 

              Overnight news.

              https://www.zerohedge.com/geopolitical/iran-agrees-invite-nuclear-inspectors-back-vance-hails-great-progress-after-little

 

              And.

              https://www.zerohedge.com/energy/oil-keeps-flowing-through-hormuz-chokepoint-normalization-efforts

 

              More analysis of ‘the deal’:

 

              The biggest issue is enforcement.

              https://townhall.com/tipsheet/dmitri-bolt/2026/06/18/victor-davis-hanson-the-biggest-test-of-the-iran-deal-comes-down-to-one-thing-enforcement-n2677936

 

              Trump’s spin is incoherent.

              https://www.ms.now/opinion/us-iran-deal-trump-vance-spin

 

              Iran’s art of the deal.

              https://www.powerlineblog.com/archives/2026/06/irans-art-of-the-deal.php

 

              The ‘deal’ opens the way for charges on usage of the Strait of Hormuz.

              https://giftarticle.ft.com/giftarticle/actions/redeem/6e584a6e-5069-4862-9d44-f17eecf989b3

 

              The real economic effects of the Iran war are far from over.

              https://www.realclearmarkets.com/articles/2026/06/18/the_real_economic_damage_from_the_iran_conflict_is_far_from_over_1188906.html

 

 

                           Push back from Israel and the GOP.

              https://www.zerohedge.com/geopolitical/us-iran-mou-eases-energy-prices-faces-sharp-pushback-israel-and-gop-hawks

 

                           The Israeli electorate not pleased.

              https://www.zerohedge.com/geopolitical/israelis-are-livid-over-trump-ending-war-overwhelmingly-believe-iran-won-poll

                       

 

                        Monetary Policy

 

              Rate hikes are on for the G10.

              https://www.reuters.com/business/finance/global-markets-central-banks-graphic-2026-06-18/

 

                            Higher interest rates are coming.

              https://talkmarkets.com/article/make-no-mistake-interest-rate-hikes-are-on-their-way-up-1781799491

 

 

            Inflation

 

              A super El Nino threatens waves of commodity inflation.

              https://www.schroders.com/en-us/us/intermediary/insights/a-super-el-ni-o-threatens-rolling-waves-of-commodity-driven-inflation/

 

                        AI

 

            The usefulness of AI models.

              https://www.zerohedge.com/markets/openclosed-or-localfrontier-ai-models-goldman-1-delta-desk-says-watch-chart-leading

 

                          Summary:  the first hyperscaler to signal that it can slow the pace of spending will likely see its share price rewarded.

  If that happens, others will take notice.That is the reflexivity that ultimately stalls the CapEx cycle…not a lack of demand,but investors    deciding that incremental returns on the next dollar of spend are no longer attractive. Watch hyperscalers share price as leading indicator.

 

 

            Tariffs

 

              The tariff math doesn’t work.

              https://thedailyeconomy.org/article/tariff-math-doesnt-work-and-the-white-house-already-admitted-it/

 

     Investing

 

            The latest from BofA.

            https://www.zerohedge.com/markets/harnett-stock-bubbles-are-always-ended-voters-and-vigilantes

 

Summary: One week after urging Bank of America clients to keep "taking chips off the table" - despite stocks ignoring the highest CPI print in 3 years and blowing through to new record highs, and then also ignoring the very hawkish FOMC, Warsh's first - until "tighter financial conditions peak once Warsh turns hawkish at the July 29th FOMC", in his latest rather brief Flow Show note (available here to pro subs), BofA's Michael Harnett summarizes the current market landscape with the letter V for Victory, Votes and Vigilantes, with markets needing the latter two for the biggest tech bubble since 2021 to burst. The second V is Votes: .. but if the GOP loses the Senate in Nov = big "dollar down, yields down, stocks down" event; Which reminds Hartnett of one of his favorite sayings: "booms & bubbles (such as this one) are ended by voters & vigilantes (and vol events, e.g. JPY & KRW crises)." Vigilantes. Since Warsh pick for Fed Jan 30th (roughly the day gold peaked, and Bitcoin tumbled just after) there has been a big US yield curve bear flattening (2s10s curve 75bps to 25bps) on “inflation = hikes” fear; recall, CPI rate > unemployment rate rare but always coincides with yield curve inversion (always a solid recession signal)... ..  But while the looming bear move from inflation boom to stagflation bust is almost certain... . it can be halted if the big oil drop offsets AI/wealth price spiral and sends CPI back <3%. In other words, the fate of the US economy and stock market is now largely in Iran's hands. 

 

 

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

            Ways to live a longer and healthier life.

            https://hsph.harvard.edu/news/the-importance-of-connections-ways-to-live-a-longer-healthier-life/

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.