Reduced rate-hike bets support short-term equity rally

📰 U.S. equity futures appear poised to end the week on a positive note, supported in the short term by reduced rate hike bets from investors who believe the Fed is likely to face a sharply cooling U.S. economy that will prevent it from raising rates well into 2023. The Fed would then have to decide whether to crash the markets with lower inflation or accept higher inflation for the time being.

However, the market still expects multiple rate hikes (including two 50 basis point rate hikes in the Fed's next rate decisions), but is gradually ruling out any Fed rate moves after the December meeting

The question remains: How will the Fed respond when the economic downturn becomes more apparent? I expect lower corporate earnings and profit warnings to create further headwinds in Q3/2022. 

For now, however, we see stocks, particularly in the U.S., trying to recover from the sharp losses of the past two weeks (the Nasdaq alone lost more than 13% during the June 6-17 sell-off). We see stocks in an oversold condition, which gives the current positive momentum some room to move higher. 

Lower commodity prices, such as this week's decline in oil and commodity prices, are contributing to a weakening in market-based measures of inflation expectations. Oil prices posted two consecutive weekly losses for the first time since early April amid a general wave of selling in commodity markets. These losses were based on expectations of falling demand and slowing economic growth. I expect commodity prices to rebound strongly in the third quarter of 2022 and remain at high levels in the coming years. 

Reduced U.S. rate hike bets and lower U.S. government bond yields are also cooling strong demand for the USD and helping risk-sensitive assets (such as the AUD, but also some of the commodities that have sold off strongly recently) to stabilize or recover slightly.


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

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

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

⚡️Crypto Market ➡️

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

Yours, Robert 🇺🇸🏦↗️🤔