Macro markets are taking a breather everywhere after a very strong month, with the SPX rallying nearly 3% in May against softer economic data and rising treasury yields. Over the past few days, US Q1 GDP saw notable downward revisions (1.6% → 1.3%) with a big drop in consumption (2.5% → 2%) and downward adjustment in Core PCE (3.7% → 3.6%). Meanwhile, China economic data has also reverted back to its old ways with Manufacturing seeing a sizeable drop to under 50 in May, significantly worse than market expectations (50.5) with widespread softness in production, demand, new orders, exports, and imports. The Hang Seng has quietly dropped -5% from its recent highs to settle back at around flat on the month.
With a lack of clear macro conviction, month-end rebalancing flows have been driving the majority of price action, with commodities and equities seeing big drops yesterday, with US equities ending Thursday weaker by around -1%, and sizeable sell-offs seen in tech stocks such as Dell (-15%), Salesforce (-20%), and even Nvidia (-4%). As further proof of rebalancing flows being in the works, tech stocks have fallen by nearly -9% against a 3% gain in the SPX, with technicals suggesting further weakness in equities in the near-term ahead.
On the fixed income side, the treasury curve has steepened (disinverted) significantly over the past 2 weeks (from -48 to -38), as markets have suddenly switched their attention to a possible 2nd Presidential term under Trump. While both US candidates are likely to pursue easy money policies and fiscally expansive programs, the treasury supply and inflation pictures are naturally more concerning for bond traders under Trump.
Furthermore, while there has been lots of focus and noise over Trump’s indictment and possible jail time after being found guilty of falsifying business records, a recent ABC/Ipsos poll shows that only 4% of Trump supporters would withdraw support even if the former President was convicted, with 80% pledging their continued support. This follows a recent poll that 94% of voters who backed Trump in 2020 intend to vote for him again in November, indicating a significantly loyal base and a contentious election cycle regardless of the result. The Manhattan court’s sentencing is scheduled for July 11, with Trump likely to appeal whatever the verdict is. There is no timetable for any other trial before the November 5th election date.
Not a lot to cover in crypto with prices range bound with ETH outperforming BTC by about 0.8% on the week. ETH inflows are steady but unexciting, while ETH S-1 approval dates are unknown with ‘consensus’ assuming a July approval timeframe at the earliest. Meanwhile, natives have started to pivot back into the large memecoins such as Shiba / Dogecoin and Pepe, with the group showing 10–20% gains in recent periods against otherwise quiet market conditions.
