Euclid Investment Advisory Blog

Review & Analysis at Close July 6, 2021

Comments

Up until today July 6, stocks appeared unstoppable, when OPEC+ failed to agree on a plan to increase production. This quickly raised the possibility that without an agreement a price war becomes likely. Regardless, LC Growth and Tech stocks had a good day with gains. The US and other developed countries are restarting their economies with global supply chains. Hiccups and shortages are to be expected, but will they go away, or give rise to inflation?

The US had a good jobs number, but unemployment still went up, particularly in government labor force. The Fed may want to stop being so accommodative, but that would lift the dollar - hurting exports and developing countries.

Everyone has been worried about inflation and rising interest rates. Perhaps, just perhaps, the narrative of continued economic growth is about to be challenged and as noted below, the Yield curve continues to flatten.

Equities

The S&P Large, Mid, Small Cap and European indices remain strategically Bullish; equal weight S&P 500, Mid and Small Caps underperforming vs. S&P 500. China in last place in ranking.

  • Equity Styles:  Large Cap Growth leading vs. Large Cap Value, Small, Mid Cap and equal weight indices.


  • Ranked Sectors:  Leaders - Real Estate, Energy, Communication Services, Technology;
    Laggards - Industrials, Materials, Staples, Utilities.

Interest Rates

The 30-year US Treasury Bond, 10-year Note Yields fell further, though Long-Term trend lines. The 2-year note yield fell from 0.250 to .220.  The Yield curve long term trend flattened further; the spread decreased to 1.15 from 1.24.

Currencies

The Australian Dollar, the British Pound, and the Euro weakened further. Gold fell dramatically, trying to make a bottom. Watch.

The US Dollar strengthened further to close at 92.54 after forming a triple bottom and is approaching Mar 31 '21 high of 93.47.

The Stronger US Dollar is a negative for Emerging Markets and commodities and the Dollar's rise may put a brake on falling US interest rates.

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