28 Jun A RELATIVELY QUIET DAY
Equities were quietly volatile following the second biggest weekly rally of 2022 with money managers rebalancing their portfolios in the final days of the quarter. The NASDAQ 100 underperformed, declining about 1%. Boosted by energy, the Dow was nominally lower by 0.2%.
As noted last week, 2022 is the worst start of a year for equities since 1970 as the markets grapple with 40-year high inflation and a Federal Reserve that is vastly behind the curve.
Treasuries are also posting their worst year since at least 1973, much of the carnage in long dated debt only occurring in the past 30 days.
The only segment of the S & P 500 that is posting a positive 2022 return is oil, up about 34% YTD. The oil sector however was the only declining sector last week falling about 1.6%.
Speaking of oil, Bloomberg reported led by Germany the G-7 is edging closer to “ditching its pledge to end fossil fuel financing.” The Group of Seven had pledged “to end the financing of all overseas fossil fuel projects by year end.” As recently as May, this group reconfirmed its commitment to this pledge.
As written several times, green energy proposals are popular but green energy policies create unrest and potential economic chaos. Today’s environment is exacerbated by Russian sanctions.
Treasuries declined yesterday after the 5-year Treasury auction was met with weak demand despite offering the highest yield in more than a decade. Bloomberg writes demand for the 5-year was the worst since December 2010. Is this a harbinger of things to come, perhaps the result of the commencement of QT?
What will happen today?
Last night the foreign markets were up. London was up 1.19%, Paris up 1.23% and Frankfurt up 0.65%. China was up 0.89%, Japan up 0.66% and Hang Seng up 0.85%.
Dow and NASDAQ futures are up about 0.5% as China softens its strict COVID protocols. The 10-year is off 8/32 to yield 3.25%.