Recession worries take over again – stocks fall, but oil climbs

📰 As we expected, the stock market rally that started the previous week seems to have fizzled out as recession worries dominate market sentiment again. While the “hard” data offered few surprises, the “soft” data, especially the sentiment data, showed a different picture. Consumers are less optimistic about the economy, weighing on Wall Street, which needs strong consumer demand to sustain still-high valuations (of assets).

European stocks also pared their three-day gains and faced additional headwinds from news that China's Communist Party is sticking to its zero COVID policy. 

Inflation in Spain unexpectedly rose to a new record, dashing hopes that inflation in the eurozone's fourth-largest economy has peaked. ECB policymakers, who are increasingly pushing for higher interest rate hikes, are weighing on sentiment in Europe and providing a floor/tailwind for the euro. The Fed, and in particular Fed Chairman Jerome Powell, have reiterated in every statement that the Fed's goal remains to bring inflation down – which I believe can only be done through a dramatic drop in demand, which will result in an economic downturn and further declines in consumer confidence.

We will now continue to see a very volatile market and investors will again be more cautious. A short-term upswing is more likely to end in profit-taking. The bear market is still intact and I expect stock futures to hit new 2022 lows in July.

The crypto market is also receiving strong headwinds from a drop in liquidity in the markets. Bitcoin fell below $20,000, I expect more selling in the crypto market and see little reason for a comeback at this point. 

We see risk sentiment deteriorating, which could support the USD and CHF (the JPY only in the short term, due to the very dovish monetary policy of the Bank of Japan). Gold remains weak, but is experiencing mild safe haven demand. Higher U.S. government bond yields and the expectation of further interest rate hikes weigh on the attractiveness of gold.

While new recession fears weigh on the commodities market, I see commodities as attractive in the medium term as well (metals, energy etc.) – as they remain scarce. Oil prices remain bullish in the short-term as well.


👁 ROB'S MARKET OVERVIEW:

🇺🇸 US Markets ↕️
Cyclical Stocks ↘️
Tech/Growth Stocks ↘️
Financial Stocks ➡️
Defensive Stocks* ➡️
(*such as Health / Consumer Staples)
Energy Stocks ↗️

💱 Forex Markets 
USD, CAD, CHF ↗️
EUR ➡️/↗️
JPY ➡️
GBP, AUD ↘️

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

⚡️Crypto Market ➡️/↘️

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

Yours, Robert 🏭🏗📉🤔