Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1. Markets Last Week
US Indices:
- Dow down 1%; SPX down 30 bps; RSP down 41 bps; NDX down 38 bps; SMH up 1.4%; RUT down 62 bps; MDY down 55 bps; XLU up 75 bps;
Mega Caps:
- AAPL down 1.4%; AMZN up 71 bps; GOOGL up 37 bps; META down 21 bps; MSFT up 90 bps; NFLX down 4%; NVDA up 3.5%; MU up 1.8%;
Financials:
- BAC down 4.5%; C down 2.2%; GS down 2.6%; JPM down 3.1%; KRE down 54 bps; EUFN up 6 bps; SCHW up 54 bps; APO up 1.9%; BX up 4.4%; KKR up 1.8%;
Dollar was up 89 bps on UUP & up 77 bps on DXY:
- Gold up 81 bps; GDX down 93 bps; Silver up 5.6%; SLV up 4.6%; Copper up 10%; CLF up 11.9%; FCX up 1.2%; MOS down 2.2%; Oil up 4.4%; Brent up 3%; OIH up 4.4%;
International Stocks:
- EEM down 1%; FXI up 58 bps; KWEB up 68 bps; EWZ up 4.2%; EWY down 19 bps; EWG up 57 bps; INDA down 1.6%; INDY down 1.6%; EPI down 1.9%; SMIN down 2.3%;
Fixed Income:
- 30-year Treasury yield up 9.4 bps on the week; 20-yr yield up 8.7 bps; 10-yr up 7.3 bps; 7-yr up 5.9 bps; 5-yr up 4 bps; 3-yr up 2.2 bps; 2-yr up 0.4 bps; 1-yr down 0.7 bps;
- TLT down 1.4%; EDV down 2.3%; ZROZ down 2.7%; HYG down 42 bps; JNK down 48 bps; EMB down 79 bps; leveraged DPG up 89 bps; leveraged UTG up 61 bps;
Last week, we saw a couple of confident recommendations for financials. This week financials sold off. Now we all get to see their earnings next week & observe the market’s reaction.
This week we heard a number of strategists tell us that the downdraft in the Dollar in Q2 should provide a lift to Q2 earnings, especially for mega Tech. Max Kettner of HSBC pointed out on Monday on CNBC that 40% of sales are generated overseas for the 7 megacaps; about 70% of revenues are generated outside the US all of which should provide a boost to stocks going forward. Mike Wilson of Morgan Stanley said that the weaker Dollar is a tailwind for stocks. Mary Ann Bartels was bullish on stocks as well because of earnings she expects.
On the other hand,
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – Dollar up 7 sessions in a row
Paul Ciana of BofA told Mike Santoli on Friday afternoon that 97 is secular trend line support for the Dollar. He gave 5 reasons why we might see a good Q3 bounce in the Dollar:
- “secular trend line support; bullish divergence from relative strength index; a slew of tremd exhaustion signals from DeMark indicators; we have bearish sentiment, very stretched bearish sentiment from BofA global fund manager survey; Asset Managers are stretched short to their record extremes; seasonally Q3 is a good quarter for the Dollar. So one really good data point could create that Q3 seasonal dollar strength“
Ciana also points to a correlation between 2018 & 2025. In 2018, the market had a small correction in the spring, a rally to highs in the summer & fall and then a big fall. His rule of alternation points out that 2025 had a big correction in the spring followed by a huge rally & so he expects a small correction in the fall. His charts point to S&P 6625 in this move followed by a fall to 6200.
Jim Caron of Morgan Stanley told Kelly Evans of CNBC why negative data coming up might have a short-lived impact:
- “I am in the camp that we are going to get worse data over the next 6 months; the growth trajectory is going to be a bit lower; the Fed’s estimates are going to be lower; inflation might be a little higher; the question is will it matter for asset prices? I think a lot of it is baked into the cake; … if its not as bad as people think then people will soon start talking about 2026; now you start talking about operating leverage… that’s a different ball game“
We also saw Stifel’s Barry Bannister say to Kelly Evans what Paul Ciana essentially said above. Bannister expects an “echo” of the sell-off of April 2025 meaning a smaller 12% correction in the S&P in the second half. Like Gundlach, he expects inflation/PCE to move up to 3% up from the Fed’s 2% target. Unlike Gundlach, Bannister says employment is “Okay”. So he doesn’t expect the Fed to cut at all.
2. Wages, Employment & “worsening” Macro
If you watch Fin TV, you see that most of them think “the labor market is strong” and they feel that the “Fed does too“. Neil Dutta of RenMac thinks they are wrong. Why? He writes:
- “Unemployment is 4.1%, but discouraged workers are rising
Wage growth is flat for more people
Labor force exits are quietly distorting the picture
And GDP isn’t keeping up“
He adds – “The Fed’s relying on a surface-level read of the labor market – and that’s dangerous.”
Speaking of superficiality or “surface-level read”, watch CNBC’s Scott Wapner exhibit his inability to differentiate between demand & supply in his conversation with Mohammed El-Erian below:
Fast forward to minute 4:59 out of a total of 5:39 minutes & listen to Wapner get to his objective – an acceptance from Mohammed El-Erian that Chair Powell is a) right & 2) that it is better to be late than early.
- Wapner at 4:59 – So you think Jay Powell is right in waiting to see what happens with the tariffs?
- El-Erian – No. If I was Jay Powell, I would be cutting but I would be cutting at a steady slow pace. I worry that he is going to be proven late; I really do worry about this. But let’s see.
- Wapner – Late but Right is better than Late & Wrong because there are lot more dramatic consequences to be proven wrong.
- El-Erian – Yes …. but if you do a typical analysis of type 1 error & type 2 error, you are more likely to be able to catch up on the type 1 error, meaning you are early, than type 2 error meaning you are late.
In case, Wapner didn’t understand the final point, every football coach knows that, if your team is going to fumble, it is much better to fumble in early 1st quarter than fumble in the late 4th quarter.
Finally will some one explain to the simple minded like us what Wapner meant by “Late but Right is better than Late & Wrong“? Since the timeframe “Late” is common, Wapner was only saying that “Right is better than Wrong“. Duh! as even a 1st grader would say. This shows how Wapner tripped over himself in his desperation to get El-Erian say Powell is right. Sad!
That brings us to the gargantuan Type 2 error from two sets of people who are & have been deemed as smart, a Type 2 error that they might NEVER be able to correct:
- Markets & Mayhem@Mayhem4Markets – The structural demographic declines in China and Japan are going to lead to an era of profound challenges.
That brings up the old adage “what’s created in Japan, does not stay in Japan“.
- The Market Ear @themarketear – 7-10- Remember Japanese bonds? – The recent 2-day rise in the Japan 30-year yield earlier this week actually surpassed the mid-May move that drew so much attention. The 50-day trend remains very much intact. This is a “must watch” for global markets in the next few weeks.
3. Good views about Stocks
We go back to what has been true so far.
- Seth Golden@SethCL – Jul 11 – A significant BULLISH signal triggered Thurs. – NYSE Summation Index achieving 900+; Deemed broadest measure of market breadth momentum, with 89% 6-month and 96% 12-month positivity rates. Positivity rates across all time periods above average. (Chart depicts prior 4 signals, all positive) $SPX $NYA $NYSI $SPY $QQQ $NDX $DIA $IWM $VOO
Surprising & un-intuitive perhaps! But historically valid.
- Ryan Detrick, CMT@RyanDetrick – Jul 10 – Today caps off one of the greatest 3-month rallies in history, up more than 25%. Turns out, this is extremely bullish. Only 5 other times in history has this happened and continued strength was perfectly normal. Up another 22% a year later on average and never lower. 💪💪
But not all is hunky-dory! Look at the highlighted divergence below:
- Seth Golden@SethCL – Jul 10 – That is one of the more obvious and outsized bearish divergences I’ve seen at the index level in some time. Nasdaq 100 relative to S&P 500 is within a stone’s throw of an all-time high and trending higher while the 14-day RSI has been in decline since May. Divergences aren’t timing tools😉 $SPX $NDX $QQQ $SPY $ES_F $NVDA $SOXX $TQQQ
Timeframes matter. Detrick’s above message about the S&P track record says “Up another 22% a year later on average and never lower”. But that doesn’t negate a short term consolidation as below.
- Ryan Detrick, CMT@RyanDetrick – July tends to be a strong month, but most of those gains happen the first half of the month. Not end of world stuff here, but some consolidation at some point the next two weeks would be perfectly normal.
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