Launch Pad

Today

Futures are slightly up. Jerome Powell's stated belief that inflation pressures will ease has made investors more comfortable with the idea that any taper is still many months off. Oil, gold and even bitcoin are all rising. Risk is back on and major averages closed higher on Tuesday and the Nasdaq scored a fresh record. The previous record was on April 29^th. The gains held overnight, and bond yields are only marginally higher this morning.
 
European Central Bank officials have agreed to adopt an inflation goal of 2% but are divided on how long they should let inflation remain above target, sources say. The ECB reportedly hopes to resolve this before a Governing Council meeting in September.
 
Wild swings in the crypto market continue. From its intra-day low yesterday of just under $29,000 bitcoin has bounced nearly 17% to $33,910 as we write. Impressive considering the lingering threats and pressure from the Chinese government to stamp out the cryptocurrency. Prior to yesterday it hadn’t been below $30,000 since January, making it quite a large round trip from its high of $64,869 on April 14^th. Globally we are seeing a much more forceful crackdown on crypto by governments, almost as if bitcoin is heading into a minefield. Tread carefully.
 
Kristina Hooper at the Invesco Blog summed up the current market mood quite well, so we’ll just use some of her words. Follow the link to read the whole post.
    This is a precarious time — stocks have gone a relatively long period without any major sell-off, and     there is heightened sensitivity to every utterance from the Fed as it attempts to transition to the start     of normalization.
    But isn’t that what many investors have been looking for? There has been little opportunity for     attractive entry points since last year; this could be that opportunity if there is a hefty sell-off.     Whether or not investors take advantage of tactical opportunities, I believe it’s important to stay the     course for the long haul — to be well diversified across asset classes but maintain adequate     exposure to a broad array of equities.


Single game sports betting will soon be legal in Canada. The bill, which passed Tuesday afternoon, will see royal assent in the coming days. It has been a long road to get this bill done, but ultimately this round seemed fairly easy with little amendments. You may be thinking, is that not already legal? The answer is yes, you can bet on sports in Canada, but the emphasis is on 'Single Game betting', which was not legal and saw many Canadians using offshore and US sites. 


Diversion: Check out the US detonating this massive explosion to test if their battle ship is ready for a war. 

Connected Wealth™ Tactical Primer

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Commodities

Oil has jumped to more than a two year high on a dip in oil inventories as the market continues to be tight. At the time of writing, NYM WTI Crude futures are up +0.81% to US$73.43/bbl. ICE Brent Crude, the global benchmark, is up +0.87% to US$75.46/bbl. API reported another substantial crude draw of approximately 7.2 million barrels last week. If confirmed later by EIA, that will be the fifth straight week of declines for oil. In other commodity news, Spot gold is up slightly this morning on a flat yield and lower US dollar. At the time of writing, the precious metal is up +0.41% to US$1,785.90/oz. Jerome Powell, Fed Chairman, also dialed back his rate hike talk which is supportive for gold. 

Fixed income and economics

The risk-on trade continues this morning with equities catching a bid pre-market and Treasury yields continuing their ascent higher. Two year benchmark rates have seemingly hit a resistance of 0.25% touched last Friday after the prior two weeks posted outsized a surprise loss of ten basis points after comments from the Fed for a hastened pace of tightening moves by 2023. That had flattened the curve by more than 25 bps and to levels not seen since late January. The selling in the front end has taken a breather (for now) and parlay that to the repositioning of trader books that have fully priced in the economic reopening in North America. Canadian retail sales for April were soft at -5.7% versus the -4.9% forecast, but note that this can be attributed partially to consumers increasing their savings as opposed to pulling back on outright purchases. Aggregate household savings has grown to $2.3 trillion in the U.S. alone, a sizable quantity of dry powder even in a $21 trillion economy. As large as the pile of excess savings has grown, it pales beside the nearly $26 trillion increase in household net worth over the last four quarters. Household wealth has never risen so fast for such a sustained period, exceeding one standard deviation above the mean for four consecutive quarters while growing at a sizzling 23% rate. As of now, supplemental unemployment insurance benefits provided a lifeline for lower-income workers who lost their jobs, and more than two-thirds of U.S. households have received the full amount of the three rounds of government impact payments. So let’s not worry too much about consumers not wanting to spend. They can, and they surely eventually will.

Chart of the day

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Quote of the day
 

The question is not what you look at – but how you look and whether you see. - Henry David Thoreau