Thoughts on the Markets (19 Jun 22)

Markets have extended their extremely bearish behavior last week. S&P posted its worst week since 2020. Bitcoin is crashing as I am writing this post, going below $18k at one time. Bond prices are buckling under severe pressure.

US economic data has deteriorated, contributing to the pessimism. Chinese economic data seems to be doing fine, but it is not enough to offset the prevailing negativity.

Stock prices are starting to look more reasonable, but negative drivers of the markets may not have peaked and turned around yet. Inflation expectations are still awful, and major economies are at risk of substantial slowdown.

Commodities have been rising steadily due to being touted as an inflation hedge, but lately have been hit because of economic recession worries. Shorting commodities may be viable if recession worries do not recede. This is my preferred tactical short bet if I am intending to short the markets, as there is still quite a lot of room for commodity stock prices to fall.

On the other hand, recession worries may actually benefit bonds. If economic data continues to deteriorate and/or inflation data goes lower, bonds would benefit significantly. I like this long bet as bond sentiment is extremely low, but I would be cautious about the timing of any bets as there are still several almost confirmed interest rate hikes coming up.

Anyway, hope you folks are doing ok. Do stay safe and sane, and be rational and keep away from impulsive behavior. Good luck!