03 Jun A QUIET DAY AND BLACKROCK’S INFLATION COMMENTS
Markets were quiet as the tussle between economic optimism and inflation concern continued to play out. Energy led the market as crude is at the highest level since 2018. Richmond Fed President commented wage pressures might be of significance, perhaps attempting to warn of a possible cost push surprise in Friday’s labor data.
A battle between hedge funds and the retail stock trader appears to be unfolding. Goldman writes hedge funds have increased short selling and is now at the highest level in nine weeks. On the other hand, according to the Options Clearing Corp, call option trades involving 10 contracts or less is rising to levels experienced at the beginning of the year, buying focused in the largest capitalized issues.
Who is correct? Will there be a repeat of January’s headlines?
Speaking of headlines, BlackRock CEO Larry Fink sees potential for a “big shock” from inflation, the result of fiscal policy and from the evolution to a green economy which will elevate prices.
As widely known, Fink is a major supporter of ESG investing and has been instrumental in forcing companies via proxy votes to become more “green,” withholding support for any management that does not support his/the progressive mantra.
Fink stated most people in the industry has only experienced declining inflation and few are remotely aware of “the ravages of rising prices.”
Many including me believes inflation will become a major issue that will challenge the valuations of the indices.
The way these remarks are presented, can I remotely suggest the Chairman of the world’s largest asset manager that controls/votes between 7% and 14% of every S & P 500 company has violated his fiduciary duty? Fink, who has withheld support for any company that has not pursued the ESG mantra, has put his interest/desires ahead of his clients for he stated the transition to a green economy will elevate prices.
Inflation and interest rates are the primary determinate of asset valuations.
There was little reaction to the Beige Book or the statistical compilation utilized at the upcoming Fed meeting. The economy is characterized as the recovery is quickening, sparking price pressures, worker scarcity and rising costs. Selling cost increased moderately while input cost rose more briskly.
What will happen today? Several top indicators are released including the ISM Non-Manufacturing index, the ADP Private Sector Employment Survey, and productivity data.
Last night the foreign markets were down. London was down 0.96%, Paris down 0.46% and Frankfurt down 0.55%. China was down 0.36%, Japan up 0.39% and Hang Seng down 1.14%.
The Dow should open nominally lower. NASDAQ futures are off about 1%, perhaps on Fed remarks that the US central bank should begin discussing a time frame to end its bond buying program. Inflation is also at the forefront of the markets. The 10-year is off 4/32 to yield 1.61%.