(Justin Vaughn, Editor, Options Trading Report)
The markets opened with uncertainty Monday, with little direction, as investors and traders were in anticipation of the inflation number to be announced early Wednesday. The Labor Department released those figures and the numbers roiled, as inflation soared to a 40 year high in the month of June at an alarming rate of 9.1%, an over-whelming figure. This is the fastest inflation since 1981. Just about every consumer product appreciated significantly, with groceries, gasoline and energy costs surging with no end game. Gasoline alone accelerated upward 11.2% from the previous month with a year’s increase of a whopping 60%. A serious concern is energy, up 7.5% in June, and up an unbelievable 41.6% fron last year. After two month of tightening, inflation still resists, as June edged to 9.1% from May’s 8.6%. As pressure mounts on the Fed to halt and reverse inflation, investors and traders alike are shiowing more uneasiness fearing a possible recession. Stocks did react Wednesday in a downward fashion, withe the Dow Jones Industrial Average losing 208 points, while the S&P 500 and Nasdaq Composite remained slightly off. The Federal Reserve Chaiman indicated that a heavier increase of 100 basis point hike is a ‘real possibility’ for July. Mr. Powell remarked that raising rates on consumer and business loans will will help ‘dampen’ the economy and bring inflation numbers down.
The Russian Oligarchs are Scrambling…to escape new sanctions. When Switzerland got on board, and joined the European Union to coroperate in sanctions against Russia, the noose got tighter, but not enough to reign in the businesses controlled by the Oligarchs. A majority of these Oligarchs have and are escaping the wrath of sanctions. They have set up dummy corporations, involving wives, children and close relativies to ‘hide’ their businesses and continue operating. They are avoiding detection, with many doing ‘business as usual.’ The Swiss are working intently to ‘disrupt’ their phoney coverups, and real estate investments in Switzerland, a slow process, that is painstakingly complicated. So far more than $68 billion in Russian assets have been frozen, including homes and valuable properties, a small figure in the scheme of their assets (The Russian Oligarchs). The Swiss are optimistic that major head-way will come about stifling the Russians.
Steady-Eddy Gold…There has been very little movement…up with gold this past year, but conversely, very little downward movement has occurred either. In the course of the past year, the stock market is down an average of 22%, yet gold has remained steady as ever, hanging in at $1,708.51 (7-15-22), and looking to move 3% to 5% in the medium term. “During challenging times, owning defensive assets such as gold and other inflation hedges tends to hold up better on a relative basis,” says Sam Stovall, chief investment strategist at research company CFRA. He adds, “It’s not that they go up but that they lose less on the way down.” As inflation persists and remains stubborn in control, gold emerges more and more as a solid hedge.
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RUMBLINGS ON THE STREET
Eric J Savitz, Writer, Barron’s, “You are going to hear talk that second-quarter could serve as a ‘clearing event’ and set the stage for improved market performance. But there are many shoes left to drop.”
Jonathan Suisse, chief U.S. equity strategist, Barron’s “It is very, very difficult to get a recession with so many job openings. A recession is in reality more than everything else, a collapse in labor markets…”
Andrew Bary, Writer, Barron’s “The economy looks resilient, and inflation is coming down. That combination could mean a solid second half of the year for stocks after a tough first six months in which the S&P 500 index fell 20%.”
Bespoke Investment Group writes, Barron’s “After a second quarter where commodity prices spiked the dollar surged, and economic data slowed, investors have been looking ahead to earnings season like a cow feels walking into the slaughterhouse.”
Rich Steinberg, chief mark strategist at the Colony Group, WSJ “Part of the selloff may be that the consumer gets spooked. The risk that the markets have is that the consumer backs off further.”