11 May CPI AT 8:30

Posted at 14:34h in Market Commentary by
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Markets were bifurcated in very volatile trading.  The tech heavy NASDAQ 100 outperformed yesterday.  Bloomberg writes over 50% of the NASDAQ is down over 50% for the year.  Goldman Sach’s list of the 25 most widely owned stocks is down an average of 52% YTD.

Continuing with the dour statistics, of the twenty-five most widely owned mutual funds in retirement accounts is down 23% with many marquee names posting declines more than 28% according to a Bloomberg wire report.

As widely discussed, inflation and corresponding higher interest rates is a primary reason for the decline amplified by intense concentration in a handful of names or sectors.  The lack of liquidity is very apparent.

Speaking of inflation, April’s CPI is posted at 830.  Analysts are expecting a 8.1% headline rate and a 6.0% ex food and energy.

Radically changing topics, VP Pence stated yesterday that activists via the ESG mantra are “weaponizing the financial system against companies and is hindering economic growth and increasing inflation.”

Amongst other things, Pence cited a proposal by the SEC that would require businesses to reveal the risk a warming planet poses to their operations when they file regulatory statements, something that is very difficult and subjective to delineate.

Several times I have referenced several ESG dominated bond indices that are/were down over 23%.  Several ESG stock funds/ETFs are off over 35%.  What is ironic the top performing sector in 2022 is energy, up more than 50%, the result of surging energy prices and dearth of ownership.  Energy also outperformed in 2021.

Will the free market be the end of the ESG mania where often financial viability is a secondary or tertiary concern?  If history is of any guise, the odds are yes as Economics 101 dictates money gravitates to the highest potential return with the least amount of potential risk.  I vividly recall the first era of socially conscience investing…aka the Calvert Funds of the early 1990s..ended following disastrous performance.

As noted above, the CPI is released at 8:30 and a major reason for surging inflation is oil as the western democracies have made oil exploration prohibitively expensive and a regulatory quagmire. [Note:  Oil is nominally higher than pre-invasion levels]  Market volatility may increase if the data is vastly different than the consensus view.

Last night the foreign markets were up.  London was up 1.14%, Paris up 2.09% and Frankfurt up 1.35%.  China was up 0.75%, Japan up 0.18% and Hang Seng up 0.97%.

Futures are up about 1% ahead of the CPI.  The 10-year is up 16/32 to yield 2.94%.

 

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