Outlook: The blip in inflation is behind us. May headline and core CPI will come in lower than the prior year’s .4% baseline, driving down year-over-year inflation and setting up a risk-on environment. Headwinds to risk remain enduring rises in the dollar, yields, and the broad commodity complex (which I believe will fail to materialize). An added variable this month is the FOMC meeting. The Fed is unlikely to declare an early victory, however I expect there to be an added degree of dovishness given Powell’s recent penchant for attempting to thread the needle. A friendly CPI print combined with a dovish pivot (both slated for June 12) would be a strong catalyst for new highs.
Equities: It’s difficult for me to see a bearish case for equities as most broad indices sit on support after having completed a run-of-the-mill retracement in May. Though falling volumes and eroding momentum are concerns on a larger timescale, the degree of bearishness among the pundits and podcast-money managers has me believing it is too soon for a sell off. At least one more leg up in QQQ and SPY seems to be in the cards. Bullish to Neutral.
Dollar: The DXY still has a way to go on the downside. A weak CPI and dovish tilt out of the FOMC will help drive the dollar below 104. Bearish.
Yields: The 4.8% peak in the 30-year on April 25 will be the peak for the remainder of the year. Momentum has rolled over and the next volatile move is sure to be down, not up. Bearish to Neutral.
Commodities: Must continue to consolidate or fall, especially energy, for risk to continue its ascent. Gold and Silver are attractive and will remain so as rates and the dollar fall. Neutral energy. Bullish precious metals.
Crypto: The floor for BTC came in around 56,500 and showed remarkable strength as financial headwinds eased. The halving event typically sees consolidation for a period of two to four months before the bull market continues in earnest. BTC’s prior high occurred on March 13. I believe the next leg up will occur sometime this month alongside a rotational shift into more speculative, but less “meme”-like, projects. Bullish.
