#SP500:
U.S. consumer spending declined in May as households cut back on purchases of high-ticket, long-lasting manufactured goods amid higher borrowing costs, suggesting the economy lost some speed last quarter. History suggests the bullish momentum could continue. Since 1950, the S&P 500 has followed up a positive first half return with an average second half gain of 6.0%. Furthermore, when first-half gains were 10% or higher, the index posted average gains of 7.7% in the second half, with 82% of occurrences producing positive results. This is a positive signal for the stock market. With the two- and ten-year Treasury curve spread back to cycle lows, the end of June will mark the 12th consecutive month of yield curve inversion for those tenors. This is a negative signal for the stock market.
Trading recommendation: range 4340 - 4475.
XAUUSD:
Fed Chair Jerome Powell spoke last week in Portugal at an annual conference hosted by the European Central Bank where he reiterated his hawkish language. Powell confessed that a recession has a “significant probability” although the Fed is not forecasting one in their baseline scenario, so of course the panel of central banking chiefs were hawkish. The Fed’s optimistic economic outlook explains the hawkish language. Our view is a potential economic downturn should ease inflationary pressures, giving the Fed leeway to revisit rate hiking plans. Expectations for a 25 basis points which at the Fed's July meeting dipped slightly, with markets now pricing in an 86%. This is a negative signal for the precious metals market.
Trading recommendation: sell 1933 and take profit 1898.
#WTI:
Fed Chair Jerome Powell has repeatedly noted the "strong majority" of Fed policymakers who feel that the central bank will need to deliver at least two more quarter-point interest rate hikes before the end of the year to definitively squeeze inflation out of the economy. Despite the announcements of two fresh rounds of cuts from OPEC+/Saudi Arabia, crude prices have largely remained below $72 a barrel as the market has been driven less by fundamentals and more by macroeconomic concerns. This will continue to be the case for part of the summer, although the deep deficit of around 2.3 million barrels forecast for 2H23 should help to spur some upwards price momentum.
Trading recommendation: range 67.00 -73.50
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