July 1 marks the start of the third quarter, which is traditionally the worst quarter for the U.S. and other global stock markets. Of course we don’t know what this year will bring, but as we noted above, we see some reason for caution when we look forward to fall, and some of that volatility might well pull forward into the third quarter.
On the ground in global stock markets, little has changed since last week. When we look at a chart of the equal-weighted S&P 500 (i.e., one which shows the price behavior of an “average stock,” rather than giving more weight to larger firms), the sideways consolidation of the market over the past few months is particularly clear:
Stocks: U.S., Canada, and Japan
Our favored areas of interest remain those we mentioned last week: technology-related stocks with visible growth and quality earnings selling at a reasonable price; Canada and Japan, due to commodity and global growth recovery exposure, respectively; and perhaps some European growth stocks.
Among commodities, we like oil (both the commodity itself, and the stocks of oil majors) and the stocks of companies with agricultural exposure, e.g. fertilizers and farm machinery — but remember, buy the dips, don’t chase the peaks.
Gold and Bitcoin
Gold will trade with the fortunes of the dollar and perceptions of future rate trajectories; if indeed tightening talk becomes more prevalent as we move into fall, that will be challenging for gold.
With major pressure continuing to be applied to cryptos in an apparent push to sideline decentralized cryptos and promote either fiat-linked stablecoins or central bank digital currencies, bitcoin may be entering one of its historical “winters,” which typically last anywhere from months to more than a year. Whether the current retrenchment will be more durable, we do not know. There will continue to be an appetite for bitcoin as an inflation hedge, and the HODL brigade (“hold on for dear life”) remains strong among the younger and more speculative investment community.
Thanks for listening; we welcome your calls and questions.
