How We Fared in July
Hard to believe, but July just flew by. When the month started, things looked pretty grim for most markets. Now things have turned around.
Stocks picked themselves up towards month-end and ended the month up a bit north of 9% after being down the same in June. If it spills into August we could be in for a muscle-bound Bear Market correction. Should be enough to draw in investors looking "buy the dips," assuming such species still exist.
(Of course, we could just follow Jim Cramer who, shill for Wall Street that he is, naturally screams you've got to buy and buy NOW.)
Gold got pounded in July, but it too had a bit of a bounce. The difference with stocks is that this may be the end of the Bull Market correction (vs. a Bear Market correction in stocks). See the difference? I sure hope so. But we'll have to see if the mini-bounce builds into a new Bull Market phase. If not, we'll still disconsolately wallowing in the Valley of Precious Metals Correction
We would note, however that while GLD (gold bullion) and GDX (Big Miners) were down for the month, GDXJ (Junior Miners) we up marginally. Significant? Signalling a PM turnaround? Who knows?
As for Bonds, there may be a story here. The 10-year yield started to correct from its push higher. So much so that mortgage rates, previously on a tear to the moon, reversed - at least a bit. One of our Brain Trust opined that if the yield crossed below 2.9% and held there, it would signal serious reversal of the higher yields/lower bond prices. And, indeed, that it has done.
Will bonds now sport something like the muscle they've had during their long-term Bull Market of the last 40+ years? That likely is asking too much. For that, we'd have to cross below 0 - i.e., into negative yields, which sure does seem unlikely. But a nice bounce might lift our negative positions a bit and give our portfolios some relief. We'll take it.
Aside from the markets, our cultural deterioration and social fragmentation continues unabated. Our "leaders" continue to push "Green" policies which have given gas prices a good goose over the last year - although we've seen some slight relief starting in July. Most of what spills out of the DC cess pool reminds me of Nero fiddling while Rome burned. But, hey, we elected them, right?
We'll set all that aside for this week. There's a lot to parse through there - and more. But it's been hot in these parts, actually very hot and humid. And after some humidity relief this weekend, we apparently will head into another H&H heat wave next week. Since we're planning an outing on Saturday with either a family visit or plain old rest for Sunday, I'll conserve my energy for now. Besides our family's got lots of moving parts moving this way and that, much of which has been and will continue to be rather disconcerting. Add in the heat and society and the combination's enough to make me retire from the fray for at least a few days.
Meanwhile, for what it's worth, here's our summary of what we consider Important Indicators that we review at the end of each month. If I were to summarize quickly, it would encompass what's already been mentioned, plus the comment that no long-term trends have been significantly impacted. Any reversals, hikes or dips find their meaning within the context of those long-term trends. They may be good grist for a short-term trader, but haven't particularly affected our portfolio strategy as of today.
Here's our summary:
Important Indicators – (as of 7/31/22)
- Advance-Decline Line: Mirrors S&P – Turned up
- Fed Funds Target Rate – Below 10-year bearish (2.50 vs. 2.67) – Yes.
- 10-year minus 2-year TSY negative?: No (2.67 – 2.89 = -0.22) – Yes
- 10-year minus 3-mo TSY negative?: No (2.67– 2.41. = 0.26) – No
- Russel 2000 Index (IWM): UP like SPY
- DT Industrials/Transports: Transports UP like Industrials - previously confirmed new low of Industrials – DT still bearish
- S&P 500 (SPY) vs. Financial Select Sector SPDR Fund (XLF): mirrors SPY UP - barely.
- S&P 500 (SPY) vs. S&P Equal Weight (RSP): Mirrors S&P – UP - No divergence
- S&P 500 (SPY) vs. Value Line Geometric Index (VALUG): VALUG a broader index than S&P or Dow. Mirrors S&P UP
- Hi-Yield Credit Spread – 4.98 DoWN from 5.62 - Spread between below-investment grade bonds and similar duration Treasuries: When high, indicates increasing defaults. Has been trending down since March.
- Shiller PE/10 – 30.99 – UP from 29.24 – still historically high (even after the quick, steep fall in stock prices, it remained elevated). [This Index highest value as long-term indicator of initial level or withdrawals (% TAV) for Retirement Investments: Higher P/Es indicate lower withdrawal % and vice-versa. Less value as guide to stock allocations shorter-term.]
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