Talking about Talking Yet? (TWTW – Jul 5-9, 2021)

Hawkish? Dovish?

Naturally, markets are at all times keeping a trained eye on any and all FED pronouncements.

This is perhaps more so lately than at any point since COVID-19 hit.

Worried a few weeks back that the FED must be getting closer to “talking about talking” (referring to earlier comments from FED Chair Jerome Powell that it was too early to start talking about the possibility of removing any of the FED’s highly accomodative measures introduced to counteract COVID => Click HERE!), market participants gathered in the release of the June FOMC minutes that on balance, FED members remain more dovish than hawkish => Click HERE! For that matter, as should by now be abundantly clear, they look to continue to err on the side of wanting to make sure the economy runs hot for a while, before risking cooling it off prematurely.

Net on net, then, perhaps less near term worries for equity markets on that front. BUT, gauging from bond yields retracing significantly to the downside from levels reached earlier this spring on inflation-related worries, maybe other worries to consider – whether Delta variants associated (incl. for the Tokyo Olympics – no spectators), or simply fears of “what if something goes wrong” against a backdrop where, perhaps, market participants on balance are overly confident in the “don’t worry be happy”, we’re reopening is all that matters scenario.

Of note:

which the company did, indicating it ended up not needing it. You set the bar, Franklin Templeton! Now looking to the rest of the industry to do the right thing, and … when they “didn’t need the support either”, please return the funds as well!

  • ETFs in Canada as at June 30, 2021 (Source: National Bank Financial): $30 Billion of net inflows. A new record for H1, 2021. Read more => Click HERE!
  • OPEC “disagreement” => Oil price inflation ahead? Counter-intuitively (perhaps), Petro currencies, which initially firmed up on the news then weakened off markedly – certainly when looking at USD/CAD. Where does that leave Oil at? Well, on the one hand, the “increase” in production that was supposed to be agreed upon is, if I get this correctly, effectively in limbo  = supply not increasing, demand same, which ought to translate into higher prices. Oh, but wait, maybe, just maybe, OPEC members individually revert back to some of the good ol’ days of … cheating on quotas? = in fact maybe more supply? hence oil down? Oh wow, I get kind of confused … except for = reopening fundamentals should be highly supportive.
  • CYBER-Security – HUGE breach … ouch … software vendor Kaseya says between 800 and 1500 businesses have been compromised by a recent ransomware attack that has ricocheted around the world … Perhaps most notably shutting down a grocery chain in Sweden, which apparently was the country most impacted by the breach, for which the bad actors (REvil) demanded USD 70 Million in ransom money, payable via … Bitcoin.
  • Chinese Technology … DIDI … ouch … brand new IPO in the US. Immediately grounded in China, for a quick “haircut” as far as market price post IPO. Glad I wasn’t there LOL. As some observers have indicated, the whole “China Tech” space is something that will bear watching, without necessarily opting to get involved until the dust settles, which could take a while …
  • Lithium – And here is a visual which we can likely count amongst the reasons as to why Horizons ETFs launched their Lithium ETF last month:

Naturally, there is this whole EV trend going on, captured in the Global X chart above as far as the demand side of the equation. Naturally, when demand is that far above aggregate supply, why do you have? other than a sense that prices have nowhere to go but up? You tell me!

In passing, it is worth noting that Global X’s LIT is currently the largest holding in Horizons ETF, at 17%+. This, of course, isn’t an issue, as both track the same Solactive Index. Both, Horizons HLIT, and Global X’s LIT charge 75 bps. Of course one has to imagine that as far as that 17% HLIT holds of LIT, the fees only apply once.

Annnnd … he did it! Sir Richard Branson beat Jeff Bezos in their Space race => Click HERE!

Last week’s performance in terms of sectors:

Of note – Reversal of fortunes in some instances here, relative to recent performance, with energy leading to the downside, and REITs leading to the upside – against a backdrop less favourable to the reopening theme, in the context of concerns/setback associated with the Delta Variants (despite COVID-19 vaccines being effective, for all we are being told).

Performance to June 30, 2021 (BMO ETFs):

Last month: Top and bottom 10 BMO ETFs:

Noteworthy led by Innovation related themes – recently introduced – all the while Gold related ETFs which fared well last month, got hit in June by the sense that the FED was closer than previously believed, to begin looking at removing all the stimulus they’ve thrown at the market to offset the devastating effects of COVID-19 on the economy, now that they look to increasingly no longer be required … The fact that last week’s FOMC minutes perhaps contradicts that narrative possibly positions Gold better for the next little while, against the backdrop of generally favourable seasonal performance. Will that happen? We’ll see, for now, recent USD strength may stand in the way … Incidentally, US Banks hit last month (ZBK; ZUB) – presumably flattening yield curve not as beneficial to their outperformance perspectives than a steepening one …

YTD: top and bottom 10 performing ETFs (BMO ETFs):

Strong gains last month in the bond ETFs category … reducing YTD losses in the process …