Stock Market Wobbles as Debt Talks Fizzle, Bond Yields Sizzle

Ulli Market Commentary Contact

[Chart courtesy of]

  1. Moving the markets

The stock market was indecisive today as investors waited for the outcome of the debt ceiling talks. The US government is running out of time and money to avoid a default that could shake the global economy. President Biden and House Minority Leader McCarthy are meeting today to try to break the impasse, but they disagree on how to cut spending.

Meanwhile, some Fed officials sounded hawkish on inflation and interest rates. Kashkari suggested that the Fed could resume its tightening cycle in July, if it skips June, while Bullard urged the Fed to fight inflation now and not repeat the mistakes of the 1970s.

The bond market reacted to the hawkish tone by pushing yields higher for the seventh day in a row, the longest streak since September 2022. The dollar also gained strength, while gold lost some shine.

2. “Buy” Cycle Suggestions

For the current Buy cycle, which started on 12/1/2022, I suggested you reference my then current StatSheet for ETF selections. However, if you came on board later, you may want to look at the most recent version, which is published and posted every Thursday at 6:30 pm PST.

I also recommend you consider your risk tolerance when making your selections by dropping down more towards the middle of the M-Index rankings, should you tend to be more risk adverse. Likewise, a partial initial exposure to the markets, say 33% to start with, will reduce your risk in case of a sudden directional turnaround.

We are living in times of great uncertainty, with economic fundamentals steadily deteriorating, which will eventually affect earnings negatively and, by association, stock prices.

In my advisor’s practice, we are therefore looking for limited exposure in value, some growth and dividend ETFs. Of course, gold has been a core holding for a long time.

With all investments, I recommend the use of a trailing sell stop in the range of 8-12% to limit your downside risk.

3. Trend Tracking Indexes (TTIs)

Our TTIs barely changed as the major indexes trod water all day.

This is how we closed 05/22/2023:

Domestic TTI: +0.95% above its M/A (prior close +0.79%)—Buy signal effective 12/1/2022.

International TTI: +5.86% above its M/A (prior close +5.89%)—Buy signal effective 12/1/2022.

All linked charts above are courtesy of Bloomberg via ZeroHedge.

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