Market Commentary — July 3, 2023
The second quarter of the year is in the bag, and it has turned out much different than investors and market pundits thought going into the year. Markets were pricing in a recession that never materialized despite a still very inverted 2/10 yr yield curve, and there are finally signs that inflation is being tamed allowing the Fed to take its foot off the interest rate gas.
The personal consumption expenditure (PSE) the Fed’s favorite inflation measure, increased 0.1% in May, bringing its YOY increase down to 3.8%, its lowest level since April 2021. Core inflation (ex-food and energy) fell back to 4.6%, still well above the Fed’s 2% target, but calming fears of a reacceleration of price pressures after April’s upside surprise reading.
The big market news is how well markets have performed YTD, with the S&P 500 up 16.9% on a total return basis, and the AI-heavy NASDAQ Composite up 32.3%. Safe to say, this is not what most folks had on the first half bingo cards, and this creates FOMO pressure on underperforming managers and cash sitting on the sidelines going into the second half of the year.
ETF markets remain obsessed with the prospect of a spot Bitcoin ETF approval. On Friday, the SEC put a wet blanket on some of the fervor, telling NASDAQ and CBOE that applications from BlackRock, Fidelity, ARK/21Shares, and others, that the filings are still not sufficiently clear and comprehensive. This will likely send folks back to the drawing board with amended filings based on that feedback – they need to name the bitcoin exchange (eg. Coinbase) with which they are expected to have a “surveillance-sharing agreement”. Here is the latest list compiled by Bloomberg of all the players in this game.
In non-BTC news, we are excited to announce we have two indexes launching next week as ETF products: the Future of Defence UCITS ETF (NATO) with HANetf will list on the London Stock Exchange and Deutsche Boerse on July 4th and the MUSQ Global Music Industry ETF (MUSQ) will launch July 7th on the NYSE. Ringing the closing bell for MUSQ, the first global music ETF, on July 13th.
Hope everyone had a great 4th of July weekend! More to come in the way of quarterly market commentary next week!
CEO and Co-Founder