After disastrous H1, sentiment remains bearish at start of Q3

📰 Global stock futures continue to fall. Markets began the second half of the trading year similarly to how they ended the first: They focused on an impending economic slowdown triggered by sky-high inflation, much tighter monetary policy, declining consumer spending, and ongoing COVID and supply chain issues.

The S&P 500 ended the first half of 2022 down 20.58%, its worst six-month performance since 1970, and the Dow Jones and Nasdaq fell even more, with the tech-heavy Nasdaq suffering its biggest six-month decline ever.

Yesterday's release of the Fed's preferred inflation indicator, which showed a slight decline in core inflationary pressures, provided a small recovery move or bull trap in regular U.S. trading – but the “optimism” was short-lived and the gains were lost again in Asian/European trading. 

The outlook for Europe remains very bleak. For the first time in two years, a key factory activity PMI reading (in June) fell below the 50 level that distinguishes between growth and contraction – data for July will likely come in even worse meaning that Europe (including the UK) is already in recession. Markets in Europe faced additional headwinds after data showed that inflation in the eurozone hit a new record high, exceeding expectations. Inflation still has plenty of room to move higher in Europe as energy prices have skyrocketed. The euro benefited from the high inflation numbers as they increase expectations for ECB action.

Risky assets continued to be the target of sellers on Friday as recession concerns remained prevalent. Both stocks and bonds were rocked by outflows this week, reflecting fears of hawkish Fed policy. Some $5.8 billion flowed out of global equity funds / bonds saw redemptions of $17 billion. Riskier currencies also sold off sharply, particularly the AUD and NZD. The crypto market remains very unattractive – and selling spikes is still the right strategy.

Oil (and gas) prices fell in line with other commodities yesterday, but remained relatively stable due to ongoing supply concerns. I expect oil prices to recover from yesterday's sharp losses. After the recent sharp sell-off in the energy sector, I expect the energy sector to stabilize. The energy sector will likely be the best performing sector in the S&P in H2 2022 (again).


🇺🇸 US Markets ↘️
Cyclical Stocks ↘️
Tech/Growth Stocks ↘️
Financial stocks ➡️/↘️
Energy Stocks ➡️/↗️

💱 Forex Markets
EUR ➡️/↗️
CAD ➡️

⚒ Commodity Markets ↕️
Oil prices ↗️
Gas prices ↗️
Metal prices ↘️
Precious Metals ↘️

⚡️Crypto Market ↘️

(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)

Yours, Robert 📉📉🔍📉