Market Commentary — July 18, 2022
The big economic news of last week was June’s 9.1% consumer price index (CPI) inflation print, which marked the highest increase since 1981. Decomposing the numbers, an 11.2% June jump in gas prices was mostly to blame, which provides some comfort given oil and gas prices have declined in July.
According to the University of Michigan’s preliminary survey of consumer sentiment, Americans’ five-year inflation expectations declined sharply in early July to 2.8%, their lowest level in over a year. This drop has fueled expectations that the Fed would move less aggressively than feared at its next policy meeting, raising rates by 75 basis points (0.75%) instead of the 100 basis points the futures markets had indicated.
The Treasury market’s inverted yield curve between the 2 and 10-year maturities, reached its widest spread since 2000, signaling recession. Indeed, many market pundits, including Bank of America, are predicting a “mild recession” this year, saying services spending is slowing and hot inflation is spurring consumers to pull back.
Looking at Amazon’s Prime Day results, more than 300 million items were sold, making it the “biggest” Prime Day event ever. Soaring inflation didn’t appear to deter consumers from the event, in which home goods, consumer electronics, and Amazon-branded devices remained top-selling categories. But there were signs that some shoppers favored necessities over indulgences, with products such as Frito-Lay snack packs landing among the top purchased items, according to Numerator’s Prime Day Tracker. Basically, consumers with incomes above $200k and millennials are still spending freely.
In ETF news, the SEC approved levered single-stock ETFs, with AXS Investments launching eight new single-stock ETFs focused on companies including Tesla, Nvidia, PayPal, Nike, and Pfizer. Europe has had leveraged and inverse single stock ETFs since 2018.
NightShares has launched two ETFs taking advantage of the so-called “night effect” for S&P 500 and Russell 2000 stocks. According to NightShares CEO Bruce Lavine (Hi Bruce! Congrats!), stocks bought at the market close and sold when markets open again in the morning often outperform based on research going back about 14 years.
There is also another “anti-ESG” ETF coming to market, the God Bless America ETF (YALL) because apparently its become patriotic to be “unwoke”? The ETF screens out stocks listed as political “activists” with social agendas. How dare companies care about others at the expense of shareholders.
Finally, Advisors Asset Management (AAM) announced the launch of its first thematic ETF, AAM Transformers ETF (TRFM). Welcome to the club, Lance McGray!
In EQM land, we have a bunch of timely and groundbreaking new indexes we have developed that we can’t wait to share with the world! Stay tuned! The EQM Natural Resource Dividend Income Index (NDIVI) launches on August 1st, with more to come!
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