(Justin Vaughn, Editor, Options Trading Report)
With Friday’s release of The University of Michigan Sentiment Survey’s scathing numbers, the outlook paints a bleak spending scenario, short and long term for consumers. The Index dropped to 57.7, down 5.8 points, exceeding economists predictions by 2.1 points. Consumers are ‘battle-weary’ after months of ‘bad news’…and now the debt-ceiling crisis. As Speaker McCarthy and President Biden square off, with little optimism, the U.S. consumer is laden down with concerns, concerns that hit the ‘bread-basket.’ Unrivaled price increases from food to appliances, to automobiles, to homes and travel, unravel spending. In all sectors of the economy consumers are fighting these higher prices with no end in sight. As President Biden and Speaker McCarthy spar over the debt-ceiling debacle, with few positive results so far, gives little solace to the weary consumer. Friday’s market closed lower and uneasy as the weekend began. Monday opened with continued investor anxiety surrounding the debt-ceiling crisis, lingering inflation and upcoming quarterly reporting from several ‘behemoth’ investor favorites. Indexes have swirled the past two weeks, from mixed to negative results. “Everything is on tenterhooks with regard to the debt ceiling,” said Jon Maier, chief investment officer at Global X ETFs. He adds, “there seems to be rays of hope, but there’s still no clear path to avoid technical default.” The general market ‘caught fire’ on Wednesday’s opening, with a fresh wave of optimism spilling onto the indices as investors and traders began to feel more positive about settling the debt-ceiling crisis with President Biden commenting on the positive, and digesting current earnings reports. The Dow Jones Industrial Average shot up over 400 points along with the Nasdaq Composite and S&P 500 following along. As the regional banking crisis cools, the KBW Nasdaq Regional Banking Index gained 7.3%, giving a strong boost to the S&P 500 and the Dow Jones indexes. Investors and traders have lacked “good news,” consistently harnessed by the market for many weeks…now with a welcome change unleashing buyers. Thursday’s trading was lighter, with all three indexes moving up. The Dow Jones Industrial Average was up 115 points with the tech heavy Nasdaq and S&P 500 up slightly. Overall predictions from both the Speaker McCarthy, and the oval office are that a hopeful solution could come next week. Steady-eddy gold has softened a bit falling just below $2,000 an ounce, but hovering. Always talked about as a possible ‘safe haven,’ in times of market weakness, and always ‘in the wings.’
Lithium Is Coming Home…”Lithium Valley” bordered by the Salton Sea in southern California is about to ‘rear its head,’ A sizeable reserve of billions of tons of lithium in the Southern California location will potentially challenge the present day suppliers, that of the golden triangle (Chile, Bolivia and Argentina) and Australia. Refineries in China face fierce competition also as potential refineries here in the U.S. will complete the Lithium process. Preparations, planning, and the building of this massive lithium producer is in ‘high gear’ with completion in 2026. Presently the U.S. is ‘handcuffed’ as we are totally dependent on the above mentioned countries and their extreme high prices, prices that are escalating monthly. As electric automobile sales climb, the requirement for lithium follows. In the U.S. alone, EV production is increasing each year, with over 750,000 EV’s registered in the U.S. in 2022, a 57% increase over 2021. Early estimates indicate the U.S.’s thirst for EV’s will reach into the millions. U.S. mining production has the potential to supply enough lithium to manufacture 7 million EV vehicles a year, for untold years, unleashing U.S. dependence.
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RUMBLINGS ON THE STREET
Roger Aliaga-Diez, head of portfolio construction at Vanguard, WSJ “All the leading indicators are pointing to a recession, but when you look out through the window, it doesn’t yet look like recession weather at all yet. That’s why we’re a little bit out of consensus and think that the Fed may even need to hike once more in June.”
President Joe Biden, after meeting with congressional leadership on the debt ceiling, Barron’s “Default is not an option. America is not a dead-beat nation. We pay our bills.”
David Lefkowitz, head of equities Americas at UBS Global Wealth Management, WSJ “I think there’s clearly enough reason to put higher-than-normal probability on a downside scenario.” Speaking to the direction of the market to come.
Randall W. Forsyth, Writer of ‘UP & DOWN WALL STREET,’ writing about the short term markets, Barron’s “In all, this looks like a summer of discontent on Main Street and Wall Street, as well as on Pennsylvania Avenue and Capitol Hill.”