(Justin Vaughn, Editor, Options Trading Report)
With a short week coming up and a shorter day Monday to prepare for the fourth of July, stocks were quiet with all indexes up just slightly at Monday’s close. Some high techs ‘speared ahead’ as traders and investors were anxious to vacate and ‘head-for-the-hills.’ Bitcoin was stronger after moving nicely to the $31,000.00 level, after months of hovering in the $25,000.00 area, the highest since May of 22. As the week unfolds, much news awaits the market: the jobs report, the Fed’s latest committee report on inflation and the worsening Chinese economy, casting turmoil worldwide. The Fed is almost certain to hike rates on the 26th of July, as the many comments by the board of governors and Mr. Powell himself has all shown solidarity, in suggesting more hikes. Their tone- “maintaining a strict monetary policy is paramount, with continued rate hikes.” Chinese stocks were battered again Wednesday, as Hong Kong’s ‘Hang Seng Index lost 1.6%, with the Shanghai Composite Index following suit, dropping 0.7%. “China still plays a really central role in terms of growth, so any disappointment has implications globally,” said Hani Redha, a multi asset portfolio manager at PineBridge Investments. Wednesday’s market finished with all three indices edging lower. Adding to the finishing slide, copper fell, weaker in part due to the Chinese economic condition. Oil finished a bit higher, near $72.00 a barrel for crude, drifting mildly since OPEC talked of cutting production.
All the indices slide back on Thursday, as Fed news strongly suggests the July rate hike is a reality. And as per usual the market was clouded all day. The Dow Jones Industrials Average lost 363 points as the index ‘whip-sawed’ all day. The Labor Market continues extremely strong, with robust numbers and consistently dispelling any suggestion of an upcoming recession.
After a better than expected first half, with indices showing remarkable upsides, optimism for a positive second half abounds, with many factors in favor. The general economy is flourishing, with nearly every sector getting back to pre-pandemic levels or exceeding prior numbers. Travel, dining out, automobile sales and household goods are just a few of the many sectors that are thriving, with little pricing concern. If the past is any indication for helping predict the second half of 2023, prospects add up to expect a robust finish of the year. If one were to examine the history of the S&P 500, 61 years of the past 95 have been positive in the second half following a ‘good’ first half. Even more convincing, the average median return for the S&P 500 in the second six months was an astonishing 9.7%, after a 9.8% return on the S&P for the first six months. High expectations for the remaining 2023 year, make for an exciting market for investors and traders alike.
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RUMBLINGS ON THE STREET
David Donabedian, chief investment officer at CIBC Private Wealth US, Barron’s “It’s a challenging time for valuation-sensitive stockpickers resistant to chasing a handful of high-multiple companies,” he continues, “the market may be due for a pause, or even a pullback, as the Fed continues to raise rates into a slowing economy.”
President Joe Biden on the prospects for a recession, Barron’s “It’s been coming on for 11 months. Well, guess what? I don’t think it’s going to come.”
Matt Rowe, head of cross asset strategies at NOMURA Investment Bank, Yahoo Finance, “A lot of defensively positioned investors are throwing in the towel in hedging,” said Mr. Rowe.
India Prime Minister Narendra Modi at a White House press conference with President Biden, Barron’s “By increasing our cooperation in artificial intelligence, semiconductors, space, quantum, and telecom, we are creating a strategic and futuristic partnership.”
Jack Denton, special subjects writer at Barron’s, “How do you make $6 billion a year in crypto? Trading Bitcoin could work, but it’s dicey. A better way: Take people’s cash, stash it in reserves such as Treasuries, and sit back while the money earns a cool 5%.”