From WW3 to Gold Crosses in One Week...
- Marc Bentin
- Jun 30
- 7 min read
BentinPartner Weekly
Dear Reader,
Please find below our latest Weekly Trend Report.
Have a nice start of the week.
Marc Bentin,
Bentinpartner GmbH
Over a brief 1-week time span, the market psychology went from fearing WW3 to sending the Nasdaq and SP500 into fresh all-time highs (and contemplating a Golden Cross technical formation) on evidence that additional economic weakness (that kept pouring in last week) was actually good news, clearing the perspective for fast approaching Fed rate cuts.
On the topic of forcing the hand of the Federal Reserve, former Fed Vice Chair A. Binder said that naming a so-called shadow Fed chief well before J. Powell’s term is ended, as Trump considers doing, would sow confusion in financial markets and even set up a potential revolt against the eventual chair. The consensus on Wall Street is also that it would expose the USD and Treasury bonds to significant (additional) losses.
D. Trump besides insulting J. Powell on several occasions last week, has made no mystery that he plans to put in charge “somebody that wants to cut rates, adding “If I think somebody is going to keep rates unchanged, I am not going to put them in.”
While short covering accelerated last week, some argued that a key missing piece of the bullish picture is the lack of breadth of the US equity market which is back to having a few tech (and AI related) stocks drive the tape higher with only 22 stocks of the SP500 at all-time highs, which constitutes the smallest break out participation ever. On the other hand, institutional investors and foreign investors witnessed their biggest-ever drop in exposure to US stocks in March and chances are that they remain underinvested now and that either a dollar stabilization, a further US stocks outperformance or booth could force then back in.
Last week economic data were mostly weak with May personal income declining -0.4% MoM (vs. 0.3% expected) and personal spending coming at -0.1% MoM (vs. +0.1% expected and +0.2% prior). The University of Michigan 1-year inflation expectation also failed to improve, climbing to 5.2% (from 5% expected) and 5Y inflation expectation climbing 4.1% (from 4% previously). Prior to that, construction spending also declined in May by -1.7% (from 0.3% expected) suggesting marked slowdown in real estate activity. The Q1 final GDP also printed at 1.4% (from 1.9% expected) with the GDP Now model now down to 2.9% (QoQ, annualized).
Today being the last day of the quarter will bring some rebalancing which could favor bonds vs. stocks at the margin (and the further cleaning of stocks that do not look good to own for quarter end).
While equities gained, the dollar continued to drop last week, with the downdraft in US exports (which fell by most since 2020) on disrupted trade flows, possibly explaining part of the further USD erosion.
European equities sputtered, feeling the weight of EUR appreciation but caught a bid towards the end of the week as well.
Bonds posted some modest gains last week, supported by weak data and two Fed officials (lining up for the good graces of D. Trump), saying they would now support a July rate cut. D. Trump said he would instruct the Treasury to “wait 9 months” to issue long dated bonds.
At a time when de-dollarization risks are on everybody’s lips, US Treasury Secretary S. Bessent renewed observations suggesting that a push for stable coins such as USD-T and USD-C (following the adoption of the new US regulation framework, the so called GENIUS Act (comparable to Mika in Europe), of which the mission statement officially states the purpose to solidify the USD status as the major currency of the world is in the making, will also fuel more demand for Treasuries.
Stable coins are pegged 1:1 to the USD, are collateralized for the most part by US tbills, designed to keep their stable 1:1 value (as opposed to bitcoins).
Primarily so far, Stable coins offer the opportunity for investors to leave one “speculative” coin for stable coins while awaiting more (or other) opportunities to get back into cryptos and staying in the “coin” world (which holds legal and tax advantages like differed taxation) in between. They also offer opportunities for cross border transfers, with additional safety for unbanked or poorly banked areas in the world suffering from fragile currencies and offer a big potential for the tokenization of real assets (where collateral will move away from the traditional banking sector). All in all, S. Bessent believes the market for US stable coins could reach USD2trn by 2028 (from roughly USD300bn currently), which would add up and plug the hole for those treasuries that the official foreign sector is not sure to want to hold onto for much longer. The easing of the leverage ratio will serve the same purpose to allow US banks to hold more treasuries.
Precious metals (and commodities) underwent a technical correction as some key technical levels were breached. We continue to view the current setback as a buying opportunity and one of the worst possible moment in history to lighten on the natural protection offered by Gold against inflation, debt overhang and the prospects for financial repression (which will force yields down at all costs).
Over the next two days, the Conservative party needs to find a way to lift the objections of 8 Republicans still opposing the “Big Beautiful Bill” if its to go through by July 4th (a total of three can be lost and one is lost for sure, Tillis). According to a recent survey, echoed by Bloomberg, Americans a wary of the Bill as well with only 29% of Americans supporting it (and 21% unsure).
Central bank chiefs from the US, EU, Japan, South Korea, and the UK will discuss monetary policy at the European Central Bank's annual retreat in Portugal.
Over the past week, the S&P500 rallied 3,5% (4,9% YTD, Z-score 2,3) while the Nasdaq100 rallied 4,0% (7,2% YTD, Z-score 2,3). The US small cap index rallied 3,0% (-2,5% YTD). AAPL was unchanged (-19,7%).
The Equally Weighed SP500 gained 1,8% (3,2% YTD), underperforming the S&P500 by-1,6%. The median SP500 YTD return closed the week at 2,6%.
Cboe Volatility Index sold off by -20,9% (-5,9% YTD) to 16,32.
The Eurostoxx50 gained 1,8% (11,0%), underperforming the S&P500 by-1,7%.
Diversified EM equities (VWO) rallied 3,8% (12,1%), outperforming the S&P500 by 0,4%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -1,4% (-8,2%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 1,3% (7,3%).
10Y US Treasuries rallied -7bps (-29bps) to 4,28%. 10Y Bunds climbed 8bps (23bps) to 2,59%. 10Y Italian BTPs dropped -3bps (-5bps) to 3,47%, outperforming Bunds by -11bps.
US High Yield (HY) Average Spread over Treasuries dropped -7bps (5bps) to 2,92%. US Investment Grade Average OAS was unchanged (4bps) to 0,91%.
In European credit markets, EUR 5Y Senior Financial Spread dropped -5bps (-5bps) to 0,59%.
Gold sold off by -3,0% (24,4%, Z-score -2,2) while Silver dropped -0,9% (23,8%). Major Gold Mines (GDX) sold off by -3,0% (49,6%).
Goldman Sachs Commodity Index sold off by -6,3% (2,0%). WTI Crude shed -5,4% (-9,6%).
Overnight in Asia…
S&P future +16 points; Hong Kong -0.3%; Nikkei+1.7%; China +0.2%
Asian stocks rose this morning, supported by record highs for US stocks, led by strong gains for Japan after Japan’s top negotiator extend his stay in the US for further talks ahead of the July 9th looming deadline.
Stocks were further jolted after the government of Canada said overnight that it would cancel its tax on American technology, handing over a victory to the Trump administration.
Japan’s May Industrial Output declined -1.8% yoy (vs. +1.6% expected).
Chinese factory activity (49.7 vs. 49.5 last month) improved for a second month while non-manufacturing rose to 50.5 (from 50.3 last month), in line with expectations. Those PMI data were the first official data coming after the 90d truce between China and the US.
Elon Musk still did not get over it yet… and slammed the US Senate’s latest version of multi-trillion-dollar tax bill, warning that the cuts to electric vehicle and other clean energy credits would be “incredibly destructive” to the country. His latest criticism of the package threatens to reawaken his public rift with D. Trump that began upon the departure from his cost-cutting job in the administration, Bloomberg reported.
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