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.
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.
And.
https://www.zerohedge.com/geopolitical/israel-sets-3-key-conditions-ending-occupation-south-lebanon
Another perspective on the Iran deal.
Of course, it is
hard to have valid perspective when no one can agree on what the memo of
understanding says.
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 %.
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.
Tariffs
New Trump tariffs shakes up the winners/losers
list.
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?
Tech stock climax.
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
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