Quote:And it appears others in the world of finance are beginning to warm to the idea that a short-term bottom in stocks maybe be forming. "The past week+ has seen 'capitulation' across currencies, fixed income and especially crypto, culminating in last Saturday’s (June 18) bitcoin plunge to $17,600," said Evercore ISI strategist Julian Emanuel in a new note. "And the news from hawkish central bankers and forward looking indicators portending recession was even more downbeat, as investors brace for an earnings season we all 'know' will bring downward EPS revisions. 

Yet last week ended without a crisis, stocks rallied, and volume was strong." Emanuel adds: "While the bottom of this bear market won’t likely happen until gasoline prices decline meaningfully, last Saturday night’s [crypto] massacre and reversals in other assets is a reminder that bear markets don’t move in a straight line forever, setting the table for a bottom/tradable rally into the next FOMC meeting on July 27." 

While Emanuel strikes a bullish tone from a more fundamental perspective, the technical setup for the markets is also looking compelling to strategists. "We see a continuation of the rally into quarter-end that should fill the gap at 4,017," says BTIG technical strategist Jonathan Krinsky. "There is a confluence of resistance in the 4,000-4,065 level including the downtrend channel and the declining 50 daily moving average." In plain English: the charts say the S&P 500 should go up another 100 points or so — then we'll see what this rally is made of.

Quote:The only major asset that has really gained ground this year is energy, with oil surging 45%. So the call of day goes to Dhaval Joshi, chief strategist for BCA Research’s Counterpoint, who says oil prices CL.1, -0.68% will halve, to $55. What he calls “the everything sell off” in 2022 has its parallels to 1981. Back then, oil producers Iraq and Iran were at war, just as commodity producers Russia and Ukraine are fighting today, and the Federal Reserve responded with aggressive interest-rate hikes. Joshi points out that there has never been a recession in which oil prices did not collapse, even in the stagflationary 1970s, as they fell 25% in 1974. The declines are particularly steep since oil prices also tend to rise ahead of slowdowns, tipping already fragile economies into recession.

Oil price drawdown

• 1974 -25%
  
• 1981-82 -30%
  
• 1990-91 -60%
  
• 2000-01 -55%
  
• 2008 -75%
  
• 2015 -60%
  
• 2020 -75%
  

Source: BCA Research

Coming back to 2022, Joshi says applying the median drawdown in the last six recessions, of 60%, to the peak of $130, means oil will plunge to $55.

Quote:Micron Technology Inc. gave a surprisingly downbeat forecast for the current quarter after demand for phones and computers weakened, but vowed to move aggressively to stave off a chip glut. The company -- the largest US maker of memory semiconductors -- warned that sales will be about $7.2 billion in its fiscal fourth quarter, far below the analyst estimate of $9.14 billion. Excluding certain items, profit will be about $1.63 a share, the company said, compared with the $2.57 predicted by analysts.

Quote:Growth stocks have outperformed value equities recently as investors begin to question if the Federal Reserve has passed peak hawkishness already with its plans to raise rates to combat high inflation. Recent bets on fed-funds futures have pointed toward a potential pivot back to rate cuts at some point next year, while 10-year yields on U.S. government debt have fallen below 3%. Corporate bond spreads have widened as recession worries bubble up. But the decline in Treasury yields appears to be giving a lift to technology and other growth stocks over value-oriented equities. “While it’s too early to declare the value outperformance ‘over,’ we do think the outperformance of tech recently is notable, because if it continues that will be a strong signal that the market is now looking past future rates hikes towards eventual rate cuts in 2023,” said Tom Essaye, founder of Sevens Report Research, in a note Wednesday. “If tech can mount sustained outperformance, that will tell us the market thinks the Fed has passed ‘peak hawkishness.’”

Quote:It isn’t a market for everyone, he admits. “If you’re a short-term investor, it may be best to stay away from all this volatility. However, if your time frame is over a year, good companies with strong fundamentals are out there making this is an attractive market,” said Wang in our call of the day. Some may already be taking that advice, as the Nasdaq Composite COMP, +2.28% is up 4% for the week thus far, beating other indexes, though still down 25% year to date. Tech has been hit hard this year by investors taking another look at valuations in light of rate increases, noted Wang. “As we wade through this uncertainty, I do think we’ll see more software companies get acquired, like Zendesk just recently. There’s a lot of dry powder in PE [private equity] right now, so this is the time when investors are looking for alternatives and reassessing their strategies,” said Wang. “If the public markets don’t value these companies properly, then we’ll see a rush of M&A. Strong companies with recurring, subscription based revenue models and strong fundamentals have significantly derated, giving investors with a long-term time horizon an opportunity,” he added. As for where markets are headed, he thinks a lot of recession concerns are priced in. He notes big institutional investors are getting more defensive and running high cash levels, hedge funds with the “lowest net exposures since the GFC,” and individual investors increasingly aware of macro shifts.

Quote:As prices declined and market volatility rose, companies continued their record-breaking buyback and dividend expenditures in the first quarter and are expected to maintain their buyback activities for Q2 through the ongoing price downturn. The record expenditures led to 17.6% of the companies in the S&P 500 increasing their earnings-per-share by at least 4%, thanks to their newly lowered share counts, up from the 5.8% in Q1 2021, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Data from S&PDJI show that Q1’s share repurchases were a record $281 billion, up 4% from Q4 2021’s record $270.1 billion expenditure and up 57.8% from March 2021’s $178.1 billion. In addition, 374 companies reported buybacks of at least $5 million for the quarter, up from 325 in Q4 2021 and up from 335 in Q1 2021. Meanwhile, 395 companies did some buybacks for the quarter, up from 383 in Q4 2021 and up from 370 in Q1 2021. For the 12 months ending March 2022, 432 companies did some buybacks, up from 416 during the prior period. The 12-month March 2022 buyback record of $984.6 billion is expected to surpass the $1 trillion mark for the first time for June 2022. While the EPS uplift remained well below the almost 24.9% rate of Q1 2019, the direction remained consistent, with declared new programs setting the stage for increased buying throughout 2022.

Quote:Innovation has been accelerating across the health care sector. Two Capital Group investment professionals look at how health care companies could lead the next bull market.

Quote:Key Takeaways The continued adoption of EVs, particularly zero-emission BEV and FCEV models, is the primary pathway for reducing emissions within the transportation sector. By 2030, industry forecasts have EVs reaching a 36% penetration rate, representing a $1.4 trillion opportunity.3,4 We expect BEVs will drive adoption in the passenger EV market and continue to take share from traditional internal combustion engine (ICE) vehicles. These market share gains can entail significant investments throughout the battery EV value chain, including lithium mining and battery production. Hydrogen FCEVs offer a promising alternative for long-haul trucking and heavy industry vehicles, given that they are significantly lighter and have much shorter refueling times.

Quote:Related ETFs LIT: The Global X Lithium & Battery Tech ETF (LIT) invests in the full lithium cycle, from mining and refining the metal, through battery production. HYDR:The Global X Hydrogen ETF (HYDR) seeks to invest in companies that stand to benefit from the advancement of the global hydrogen industry. This includes companies involved in hydrogen production; the integration of hydrogen into energy systems; and the development/manufacturing of hydrogen fuel cells, electrolyzers, and other technologies related to the utilization of hydrogen as an energy source. DRIV:The Global X Autonomous & Electric Vehicles ETF (DRIV) seeks to invest in companies involved in the development of autonomous vehicle technology, electric vehicles (“EVs”), and EV components and materials.  This includes companies involved in the development of autonomous vehicle software and hardware, as well as companies that produce EVs, EV components such as lithium batteries, and critical EV materials such as lithium and cobalt. Click the fund name above to view current holdings. Holdings are subject to change. Current and future holdings are subject to risk.