Disclaimer: Not investment advice.
The highly anticipated CPI report for the month of May has finally arrived. It recorded 5%, a figure last seen on 2008 and an increase of .8% compared to April. As can be seen on the graph, Energy commodities (fuel and gas) saw major increase in prices on a 12-month period at 54.5%. This is followed by used cars and trucks at 29.7%.
In reaction, the US10Y dropped -4.06% on Thursday, although it initially rallied to 1.52 after the report was released.
I searched the word transitory factors from the FED minutes of the meeting last April as it seems investors are convinced about this narrative for now.
Core inflation was expected to ease some later in the year but to remain above 2 percent at the end of 2021, boosted by large increases in import prices, a recovery in prices that had been especially affected by the pandemic, and the temporary effects of supply bottlenecks. Inflation was then projected to dip slightly below 2 percent in 2022 as the influence of these transitory factors diminished, before returning to 2 percent by the end of 2023, supported by sustained tight levels of resource utilisation in labor and product markets.
Here's an article on Investopedia of what performs best on a high inflationary environment.
Markets
QQQ rallied +1.68%, SPY inching higher (to break ATH again?), and IWM price action still above the flag break-out levels.
SLV is still within range (+.35%).
Semiconductors (SMH) has the most interesting chart on thematics. I think every investors now know the story on chip shortages which is expected to persist until 2022.
Here's a weekly chart on various sectors. Healthcare (+2.01%), Finance (-2.37%).
Crypto
Crypto will never run-out of interesting news and stories. To start off, South Korea then Thailand ban trading of memecoins and outright useless tokens. This is the regulation I fully support; it is not acceptable that we have scamcoin, cumrocket, more dogcoins trying to replicate Doge's success, etc.
The shutting down of crypto-miners in China continue to escalate as it spread to Yunnan province. On the other hand, El Salvador, the first country to declare Bitcoin as legal tender signals they'll be mining Bitcoin using Geothermal energy.
Glassnode Insights - Bitcoin and Ethereum on-chain transactions fell. I checked my cold wallet and found that if I swap coins/token using the Ethereum network, the fee is now roughly £4-£5 which was as high as £18 last week. De-Fi also showed similar trend. The number of daily Uniswap trade transactions has fallen by 28% since peaking in mid-May suggesting a slowing of demand for tokens.
Investment
I surrendered my investment accounts from a Building Society (that shall not be named) this week after I learned that they expose me to 20% Bonds and would not make any changes. I expected to be penalised for the early turn-over but I was surprised to have a drawdown of 19% from this, solely from FEES! I was disappointed about this as I was religiously paying my premium for the last 3 years. On a lighter note, I am out. And I could only live, learn and move on. I have now transferred the funds to equities.
I made 2 trades - CLNE (+30%), SE (+4.5%). I have learned that when secondary and tertiary names begin to randomly pop out to ride on a trend e.g. Meme Trading, that's a good top indicator. As expected, the meme names collapsed this week. While many made hundreds of thousands to even millions, others are sitting on massive losses as well.
Downtime Read
Pod
Fooled by ‘The Dream’ and Saved by Global Macro · Erik Townsend
/End