Market Tune-Up

For our beach investors… drink a Frozen Margarita and get paid. 1M today could be around an extra 50k in one year with less risk than trading.

These are the best rates you can find in the fixed-income markets:

• C.D.s (New Issues): 5.40% (1-year term)

• U.S. Treasury Bonds: 5.45% (6-month period)

• U.S. Treasury Zeros: 5.22% (9-month period)

• Agency/GSE: 5.76% (5-year period)

• Corporate (Aaa/AAA): 5.29% (10-year period)

• Corporate (Aa/A.A.): 5.49% (6-month period)

• Corporate (A/A): 6.67% (9-month period)

• Corporate (Baa/BBB): 11.35% (5-year period)

• Municipal (Aaa/AAA): 4.19% (3-month period)

• Municipal (Aa/AA): 4.54% (6-month period)

• Municipal (A/A): 4.51% (3-month period)

• Taxable Municipal: 5.93% (30-year+ period)

For our street investors… face the wall with A.I. sentiment analysis and adjust your trading for Today (June 1, 2023):

Given the pre-market news, our trading plan today will consider several factors:

1. The BOJ's expected continuation of ultra-low rates should positively impact Japanese equities, which implies a potential for international diversification into the Japanese market (EWJ, DXJ) in expectation of comparative outperformance. This could also cause a slight decrease in demand for U.S. equities, mildly affecting the SPY and DIA.

2. The strong performance of Japanese tech firms including Advantest and Fanuc alongside the reversal of fortunes for Tokyo Electron and Screen Holdings suggest a potential rebound for the tech sector. Expect possible positive influences on the QQQ and individual semiconductor holdings (SOXX, SMH). However, the sectoral effect might not be significant on broad indices like the SPY, DIA, and RUT.

3. Given the impressive performance of Fast Retailing, the retail sector might see a boost today. Watch ETFs like XRT and specific retail equities for potential opportunities.

4. The moderating wage growth in the US labor market suggests a possible delay in the Fed's rate hike. This scenario bodes well for equities in general, as lower rates typically boost the present value of future corporate earnings. The SPY, DIA, and RUT should all benefit from this development.

5. Despite broad-based gains in Japan, utilities slipped, led by Tokyo Electric Power Holdings. As a result, keep a close eye on the utilities sector (XLU), which might experience a slight decline.

6. The VIX, a measure of market volatility, could be stable or potentially lower due to the expected delay in the Fed's rate hike and the avoidance of a catastrophic debt default.

7. Lastly, the potential delay in the Fed's rate hike might lead to a slight weakening in the USD, supporting multinational companies in the DIA and potentially affecting currency-sensitive sectors like materials (XLB) and industrials (XLI).

In summary, given the current pre-market news, today's trading strategy involves watching for potential opportunities in Japanese equities, the tech and retail sectors, and keeping a wary eye on utilities. A general bullish sentiment on U.S. equities could also be exploited due to expectations of continuing low-interest rates.

Events

Economic events:

1. Motor Vehicle Sales: In April 2023, U.S. new vehicle sales totaled 1,357,125 units, a 7.7% increase from April 2022. Passenger car sales increased by 4.6%, while SUV and truck sales increased by 8.6%. General Motors and Ford saw an increase in sales, while Stellantis saw a decrease. Tesla sales increased by 21.2% while new EV startups also saw increases in their sales. The best-selling models included the Ford F-Series and the Chevrolet Silverado.

2. PMI Composite Final: The S&P Global US Composite PMI rose to 54.5 in May 2023, up from 53.4 the previous month. This marks the fastest pace of expansion in the private sector since April 2022, with service sector growth accelerating due to stronger demand conditions. Manufacturing production rose only marginally, and employment levels increased fastest since July 2022. Business expectations for the coming year improved.

3. Factory Orders: In March 2023, new orders for manufactured goods in the US increased by 0.9% compared to the previous month, rebounding from two consecutive months of decline. The biggest contribution came from a 9% surge in demand for transport equipment. Orders for computers and electronic products, electrical equipment, appliances, components, primary metals, and fabricated metal products rose. However, demand decreased for machinery and furniture, and related products.

4. ISM Services Index: The US ISM Services PMI is at a current level of 51.90, up from 51.20 last month but down from 57.10 one year ago, marking a change of 1.37% from the previous month and a decrease of -9.11% from one year ago.