Market Commentary — June 27, 2022
The market is in a new phase where bad news is good news. Signs that inflation is moderating as growth cools, helped stocks to rally this last Juneteenth holiday-shortened week, lifting the S&P 500 out of bear market territory. Nearly every sector rebounded with the exception of Energy, as oil prices continue their retreat off record highs.
The week’s economic data offered evidence that Fed action is having its intended effect of slowing economic growth and curbing inflation. Existing home sales fell to their lowest level in May since June of 2020 thanks to higher mortgage rates. And June manufacturing activity came in well below forecasts at 52.4 vs 56 and services fell to their lowest level since January. Particularly heartening was data showing that manufacturing input inflation reached its lowest level since March of 2021.
The University of Michigan’s final reading of June consumer sentiment was revised down to 50.0, its lowest level in over four decades. The report also showed that consumers expect inflation to rise at an annualized rate of 5.3%, below the peak rate of 5.4% recorded in March and April.
Chairman Jay Powell’s testimony before Congress also helped soothe investors that the economic slowdown could avoid a recession disaster. Powell’s comments, along with the weaker-than-expected economic readings, briefly pushed the yield on the benchmark 10-year Treasury note down near 3.0%, off significantly from the previous week’s intraday peak of nearly 3.5%.
In ETF land, with the Bitwise and Grayscale decisions looming, hopes for a spot Bitcoin ETF approval are running low. The two applications currently on the radar are those of the Bitwise Bitcoin ETP Trust, with a decision deadline of June 29, and the Grayscale Bitcoin Trust (GBTC) conversion application, with a deadline of July 6.
Meanwhile, investors piled into the recently launched ProShares Short Bitcoin Strategy (BITI) ETF, raising more than $11 million in its first few days of trading.
And the Canadian Purpose Bitcoin ETF experienced a record one-day mystery outflow of $500 million, the equivalent of 24,510 Bitcoin or 51% of the ETF’s AUM. Ouch.
Finally, last week the Supreme Court overturned Roe v. Wade, ending 50 years of federal abortion rights. Now that Roe v. Wade is no longer the law of the land, a woman’s right to an abortion is protected in less than half of the U.S. states and in none of its territories.
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