That late selling swoon yesterday hinted at the “news” received this morning that inflation continues to rage.  Everyone knew food and energy were insatiable beast, but higher prices remain relentlessly elevated for vehicles, home furnishing and shelter. 

Core inflation has edged lower for the second consecutive month but not as fast hoped.

When the news broke, the algorithms went to work. All the major indices were off about 1.6% and holding until the next big economic report came out from the University of Michigan Sentiment. The initial read for June of 50.2 set an all-time record low. This series goes back 85 years.

Consumer Sentiment

One year inflation expectations edged up to 5.4% from 5.3%.

Runaway inflation is not letting up, and real wages have gone deeper into the red – a negative 3.00% in May.

The market is reeling, and it feels like a lot more people are throwing in the towel.

You have to be careful not to be too emotional.  It’s really tough because a lot of the problems are self-inflected.  That Covid19 “rescue” package should have been less or not issued at all.  Same for paying people not to work or lavishing millions on well-off couples in the name of childcare. 

Technical View

All that good work for naught, as the market tumbles back toward key support levels that must hold.

Look at the S&P 500 – it tried over and over to clear that resistance line, but as usual, when these tests fail, the result is share retreat.

The cash position is elevated in the model portfolio.  Holding and waiting. The market is oversold if there is no recession and will spring back sooner rather than later.  I still think we skirt recession, but it’s a nail-bitter at the moment.

Have a great weekend.