Market Commentary and Updates July 1, 2022

Corporate High Yield (HY) Bonds:

Corporate HY bonds Sold off along with stocks and government bonds immediately after the Fed's most recent interest rate action. This was despite the fact there were no surprises in the action. High yield bonds appear to be stabling once again and we will see if the rise is enough to support a continued stock market rally.

Our Corporate HY bond model remains in a defensive mode being invested in a money market fund.

Muni High Yield Bonds:

Muni high yield bonds have behaved similarly to corporates since they reversed trends. Early signs that the inflation rate will decline in the months ahead are evident in many base commodity charts. This is important because inflation is the primary driver of interest rates moving higher and bonds moving lower.

Our Municipal high yield bond model remains in a defensive mode invested in a money market fund.

S&P 500: 

The week of the 17th all markets declined sharply. Stocks rebounded sharply this past week with modest advances in all of the bond markets. The advances in bonds need to proceed a good bit more in order to support the move in stocks.

Our Reversal Model continues to be defensive and nimble between stocks and government bonds.  It will remain in that mode until stocks can prove their ability to move persistently higher.

Treasury Bonds:

Bonds, like stocks, have been unable to maintain an uptrend for more than a few days following the April low. The Fed has clearly stated their intentions and the markets have pretty fully discounted the Fed's expected moves through the end of the year. If the early signs of inflation abating continue, this will be good news for bonds as well as stocks.

Our Reversal Model continues to be nimble between government  bonds and stocks while our overall market models remain in their respective defensive mode. 

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