Monthly Asset Class Report

  • Commodities were up again, to no one’s surprise.
  • The SPX was pancake-flat, but the Nasdaq took another cross to the face.
  • Despite the inflation story, the real estate chart looks bearish.

Good morning from the foothills!

I’ve compiled yet another month’s worth of charts.

It’s hard to believe it’s June already.

But before we get into our swimming trunks in earnest, let’s review May’s charts.

That commodities rallied is unsurprising.

But stocks and bonds finished the month strongly, thanks to the drop in yields.

I’m not happy about that.

It’s imperative the Fed get the point across it will slay the inflation monster.

But to be fair, that’s an increasingly difficult job when you have bad government policy lengthening supply chains.

With that said, the real estate chart doesn’t look great.

US real estate looks weaker in all parts of the country, except the South.

That’s unsurprising, as Americans like to breathe free air.

And free air is tough to come by in New York, California, Oregon, and Washington.

Cryptocurrencies are the piñatas the market is hitting with a bat… and without a blindfold.

Without further ado, let’s get to the charts.

S&P 500

The last full week of May featured a huge rally going into Memorial Day weekend.

(That last little red candle is this week’s, which won’t be fully formed until Friday’s close.)

I was unimpressed with Tuesday’s market followthrough.  Not much of a response.

That doesn’t mean we won’t rally a bit from here.  But I still hold to my call that we’ll head down to 3,213 or thereabouts.

Nasdaq Composite

Still ugly.

Even AAPL’s chart has turned ugly.

I’d still stay out of tech.

This is the proverbial falling knife.

Russell 2000 (Small caps)

 

From two months ago:

The Russell has held steady to its great credit, but I stick to my $160 call.

I’ll hold to that call.

The US 10-Year Yield

 

After breaking the 3% level, we’re taking a respite.

As I wrote in yesterday’s Rude, the danger here is Powell doesn’t hike rates enough for the plutocrats to feel pain.

But if I’m forced to bet, I reckon the 10-year heads well north of 3%.

Why?

Because I’m not convinced the Fed has inflation anywhere near under control. 

Dollar Index

Not only did we break through the psychological barrier of 100.

We rocketed up to 105 at the end of April.

Then May came.  And the USD has been getting pancaked ever since.

My guess is the USD will hover between 98 and 104 until Powell convinces the market he’s 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 break through.

USG Bonds

From two months ago:

I said we’d hit 132, and so we have.

We got all the way down to 128, but then another bear market rally happened.

Fair enough.  Now I’m looking at the 127 level, then 117 after that.

We got all the way down to 114 before the market stabilized around the 116.5 level.

I can still see 105 as the next target.  But that’s up to the Fed.

Investment Grade Bonds

We’ve had a two-week rally to end the month.

I’m still not a fan and think we’ll head to 106 next.  Then 100.

High Yield Bonds

From two months ago:

We got down below 80, but bounced off there.  I’m still looking at that 77 level first.

There’s nothing I like about junk right now.

Well, we hit that level and then had a massive bounce.

This isn’t surprising in light of the equities markets rally.

Junk acts like equity, as it’s more dependent on its underlying quality of earnings and credit rating than interest rates.

Real Estate

I’m starting to think we’re 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.

I’m puzzled, as real estate usually likes inflation.

But the chart doesn’t lie.  It’s bearish.

Base Metals: Copper

Again, we were sitting rangebound in copper for ages.

Now I’m beginning to think stupid economic policy is finally weighing on this leading indicator.

We’re right about at a death cross (when the 50-day moving average cross below the 200-day).

This could be bearish for the economy.

Precious Metals: Gold

Yawn.

That’s all I have to say about gold.

Precious Metals: Silver

From last month:

Like Gold, it’s another yawnfest.

We should start calling silver “Yawny McYawnface.”

Cryptos: Bitcoin

That last up candle is actually June 1st’s, so far.

May was a disaster.

The downside risk for Bitcoin is enormous.

If we break below $30,000 for a decent interval, there’s nothing between there and $10,000 to support it.

And really, there’s not much of a bull case here.

Cryptos: Ether

Following on from Bitcoin, Ether looks ugly, as well.

If it breaks below $1,800, Ether will probably trade down to $600, if not $400.

It’s an important time for crypto.

Altcoins are practically worthless.  And the big coins are performing terribly.

Trad Asset Class Summary

Commodities were the month’s top performer, again.

But in contrast to last month, the USD was down over 1%.

The SPX was pancake-flat, barely registering a positive return.

And despite the drop in bond yields toward the end of the month, the 30-year finished down.

Crypto Class Summary

Monero, the most secretive coin, was the best performer in a terrible ensemble.

Everything else was crushed.

ETH, my favorite coin, got smashed.  And Elon’s favorite scam, DOGE, was punked.

Wrap Up

Other than commodities ticking up again, it was a pretty awful month.

Stocks, bonds, real estate, and crypto all fell to varying degrees.

Even the USD had a rough month, though I suspect this is temporary.

The important thing is to get a feel for the market and act accordingly.

Here’s some gallows humor for you:

Have a great week ahead.

All the best,

Sean

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