Here’s The Asset Guidance Group Outlook for the Week Ahead… 

This week’s focus turns to inflation, but investors should be mindful of several Fed
speeches and the kickoff of Q2 earnings season. U.S. CPI comes out on Wednesday,
followed by PPI on Thursday. Consumer prices are expected to increase MoM, but
the YoY change will likely tumble to near 3% due to base effects and the decline in
energy prices. The core reading has not been falling nearly as quickly, hovering
above 5% YoY largely due to lagging shelter data, which may influence whether the
Fed raises rates beyond the 25bps expected later this month. The U.S. calendar also
includes Treasury auctions, consumer credit figures, and the first estimate for July
consumer sentiment and inflation expectations. Mid-sized and large U.S. banks
will be among the first to report Q2 financial results at the end of the week.
Internationally, China’s inflation data should be released before U.S. markets open
today, and later in the week trade balance numbers will arrive as the country’s
economic outlook remains uncertain. Economists expect the Bank of Canada to
raise rates by a quarter-point on Wednesday, but interest rate markets are less
convinced. Finally, the UK will announce May employment figures on Tuesday as
wage-price spiral fears persist, with monthly GDP arriving Thursday. [1]

Recapping Last Week

.S. equities edged lower after the labor market showed scant signs of cooling,
solidifying prospects for additional Federal Reserve interest rate hikes. The Russell
2000 Index fell 1.25%, while the Nasdaq Composite and S&P500 slid around 1%. Ten
of 11 S&P500 sectors were negative, with healthcare and basic materials dropping
2-3%.Crude oil prices rose 4.5% after Saudi Arabia and Russia said they would deepen
supply cuts next month. Although the June jobs report came in below estimates for
the first time in 15 months, there was still enough underlying strength to send
Treasury yields soaring, with the 10-year jumping above 4% and the 2-year spiking
above 5% before retreating slightly. Wage growth was higher by 0.4% MoM and 4.4%
YoY, both above forecasts, and jobs added remained above 200K. Earlier in the week,
the ADP private payrolls report, which is often disconnected from the government
figures, revealed a whopping surge of 497K. Job openings fell in May and quits rose,
but fewer workers are leaving their jobs than a year ago. The June FOMC meeting
minutes suggested that some members favored a hike rather than a pause, but nearly
all said that additional increases would likely be appropriate. The jobs data all but
cemented a rate hike at the upcoming July meeting, with inflation numbers still to
come. In other news, the ISM surveys highlighted the growing gulf between services
and manufacturing, as Americans continued to favor spending on experiences rather
than goods. U.S. factory orders expanded for the fifth time in 6 months in May, but
non-durable goods orders fell 1.2%. Overseas, China announced export controls on
metals used in semiconductors ahead of U.S. Treasury Secretary Yellen’s visit to
Beijing. Yellen called for market reforms and fair-trade practices after meeting with
Premier Li Qiang. China’s factory and services activity slowed in June according to the
private sector Caixin surveys. Australia’s central bank held rates steady but left the
door open for further tightening. Lastly, final Eurozone PMI numbers and German
production figures suggested weak recovery from the recent technical recession.  [2]

Chart of the Week:

After staying in a narrow range during June, U.S. Treasury yields have pounced to the upside, notching new YTD highs last week. Buoyed by much stronger-than forecasted employment data on Thursday, the 10-Year Treasury Index (TNX) surged to break near-term resistance and closed the week above the $40 (4% yield) threshold. The yield curve remains steeply inverted however, with short-term yields lying higher than longer-term yields. This reflects the widespread expectation for the Fed to continue hiking rates in the near term alongside an assumption that rates will likely be lower longer-term. It remains to be seen if yields will eclipse the October 2022 highs.

Click here to view chart. [3]

Sources: [1] [2] [3] tdainstitutional.com tdainstitutional.com; Any performance data reported by Asset Guidance Group, LLC has been grouped and reported by kwanti.com, imported from TDAmeritrade Institutional, Risk categories as scored by Grable-Lytton test and grouped by like risk tolerance levels; NOTE: individual account performance grouped solely by model classification type in terms of risk tolerance. Individual portfolios include equivalent equities exposures via like models, but many may hold additional investments like structured notes, fixed income investments such as CDs, bonds, and other individually preferred securities. 1-Week risk score denotes overall performance of all AGG client portfolios grouped together by like-risk tolerance scores not by identical investment allocations; [4] [5] Macro Monday (tdainstitutional.com);

*All other Asset Guidance Group analysis, www.stockcharts.com; All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat,0020Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet; Chart from Indeed’s Hiring Lab.

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