While market-based forecasts are not without flaws, they often serve as the foundational estimates for various financial projects. A prime example is tracking the evolving trends and shifts in Federal Reserve monetary policy, where monitoring the 2-year Treasury yield can provide significant insights.
* The European Central Bank plans to implement two rate hikes this summer.
* Goldman Sachs increases the likelihood of a US recession to 30% by 2023.
* China’s economy is grappling with downside risks.
* Federal Reserve interest rate hikes are beginning to curb borrowing and spending.
* Israel’s government has collapsed, and new elections are scheduled.
* A new US ban on imports from China’s Xinjiang region has commenced.
* The German 10-year yield has surged to its highest level since 2014:
The markets faced a comprehensive decline last week. Such occurrences are rare, yet the trading week leading up to Friday, June 17 showcased all major segments of global markets experiencing simultaneous downturns, as reflected by a range of ETFs.
* NATO’s secretary-general predicts that the Ukraine war could extend for years, reports indicate.
* France’s newly elected President Macron has lost his absolute majority in parliament.
* The EPA’s authority over greenhouse gases is at stake in an upcoming Supreme Court ruling.
* Emerging markets are under increasing pressure from escalating interest rates and inflation.
* Apple employees in Maryland have voted to unionize.
* Bitcoin has rebounded after experiencing a sharp decline below $18,000 over the weekend.
* US Treasury real yields have returned to positive figures but remain below their 2018 peak:
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The outlook for the US economy appears increasingly bleak, as indicated by a variety of soft data and forecasts. However, despite this prevailing pessimism, current hard data suggests a tendency for growth. Unless an unexpected and severe downturn in either business activity or consumer spending occurs, the US economy is likely to continue its expansion for the foreseeable future. The future remains uncertain, which is not unusual; yet growing pessimism triggers questions about whether the next recession could become a self-fulfilling prophecy.
* Russian President Putin continues to leverage Russia’s energy resources astutely.
* China has launched its third and most advanced aircraft carrier.
* Over 60% of executives anticipate a recession within the next 12 to 18 months.
* European leaders have outlined a pathway for Ukraine to join the European Union.
* The World Trade Organization has revised global trading protocols for the first time in many years.
* The cosmetics company Revlon has filed for bankruptcy, citing supply chain issues.
* The Philly Fed Manufacturing Index has turned negative in June.
* US jobless claims have decreased, but still indicate a robust labor market.
* US housing starts fell in May, reaching their lowest level in over a year:
The Federal Reserve’s decision to increase its target interest rate by 75 basis points last Thursday—marking the largest hike since 1994—demonstrates the central bank’s growing commitment to combat inflation.
* The leader of China reiterates China’s support for Russia on issues of sovereignty and security.
* Three European leaders visit Ukraine, amidst a US pledge of $1 billion in new security assistance.
* The Federal Reserve raises interest rates by 0.75 percentage points.
* Business inflation expectations remain steady in June.
* The NY Fed Manufacturing Index reports a second consecutive month of contraction in June.
* US homebuilder sentiment drops to its lowest point in two years in June.
* US retail sales declined in May, marking the first monthly loss of the year:
The current outlook for asset classes has turned unfavorable. The pressing question is when it will be comparatively safe to begin increasing risk exposures. Although the timeline is unclear, signs of a shift may emerge through various ETF pairs.
