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Weekly Memorandum 6/13/2022

Stocks once again gapped down and closed near the lows of the day on Monday, continuing the bearish momentum acceleration that resurfaced last week after CPI numbers came in higher than expected. The pullback is sparing no sectors, even energy, despite Crude Oil holding up well.

The Fed is set to raise rates at least 50 basis points later this week. There is some talk now of a 75 basis point rate hike as the Fed is way behind the curve now. So much for 'transitory inflation.' Central banks may try to engineer a recession to slow inflation, but will that work given the supply shortage factor playing into the equation?

The U.S. Dollar solidified a higher-low in alignment with our expectations and appears poised for new highs as the carry trade continues to benefit the world reserve currency. Commodity markets are choppy right now as liquidity conditions continue to deteriorate. Cryptocurrencies are in collapse mode, which also was in alignment with our expectations, and a serious risk that we outlined in the Mercator Crypto Report.

A new Mercator Letter will be published on this Sunday, June 19. We will update our macroeconomic outlook as well as provide some actionable trade ideas to navigate this market environment. Our work will also be featured this Wednesday in Benzinga's Boot Camp.

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