By Jeffrey Cohen, Investment Advisor Representative
US Advanced Computing Infrastructure, Inc.
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Today is a typical Summer day in the markets. Low conviction to most moves, and a few 'big plays' to keep people interested while most of (us) are vacationing.

Interest rates are inverting. The long duration US Treasury securities are up, having recovered fully from their June falls.  Short-term interest rates continue to rise, with bank deposit rates over 2%, FDIC insured, with $1 or $100 minimum deposit. 

Retail showing more strain. Walmart $WMT is down almost 10% pre-market as they warn that their $60B in inventory will require a sale to clear, and that consumer demand is down due to fuel and food costs. We are not sure there isn't some 'labor market' stress in there as well reducing sales in the stores. We personally saw retail suffering due to labor shortages with reduced hours of operation, messy stores, and longer lines in all retail we visited on our vacation.

Other 'safe' dividend stocks have been much weaker than normal. AT&T $T and Verizon $VZ are both down significantly based on concerns that consumers will give up their expensive plans for phone and internet.  Another worry is they keep their plans, but they do not pay their bills (or pay them later).

We also see weakness in old tech and old financial services ($IBM $INTC) and ($AMP).

We do see strength in regional banking, with bank stocks rising on stronger earnings and higher interest rates (short rates) which will allow them to make more profitable loans (in theory). Also, the decline in longer interest rates allows them to lower the price of their mortgages while still maintaining their profit margins.  Banks like an inverted yield curve, but not a recession. This could be a short-term bounce higher. We track $KRE as an ETF that tracks US regional banks.

We see fixed income getting stronger on lower long-term interest rates, while the Federal Reserve Board FOMC is likely to continue raising short-term interest rates. This could break the system and cause an inverted yield curve, but the market seems to be saying 'What, me worry?'

US Covid numbers are up to 120k new cases per day and about 6k new hospital admissions per day. Even our President has Covid.

Finally, we comment on President Biden's industrial policy of hope and prayer. This is not encouraging. We suggested the President create a 10-point action plan to recover our US economy, assign 100 Federal Employees to implement each step of the plan, and to track and report on progress to the American people monthly and quarterly. He should also present the plan and open up his Twitter lines to comment and feedback. Did he miss anything? Anything to remove? Will it work? Fine tune in the churn of the market and public opinion. This will help us all work together to recover our economic growth.

It is our opinion that a politician should not change the definition of 'Recession' just because we might be in one. That is changing the goal posts in the middle of a Chicago Bears football game, or lowering the basketball hoops in the middle of a Chicago Bulls game. Maybe making the goal larger during a Chicago Blackhawks game. Sure, we would love it to see our teams win for a few moments, but then everyone else gets the same treatment, and all we did was make the games easier...and that is not the point.

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We will run our model tonight to look at market volatility and update our website with new data.

​Good luck in the markets and watch out for the slow days of Summer.

By Jeffrey Cohen, Investment Advisor Representative
US Advanced Computing Infrastructure, Inc.

Market is set to rise today. Happened on large index futures bets 30 minutes before opening.

US Dollar is weaker today, and this helps commodity prices (priced globally in dollars) to rise. 

Just a remember...the market may be going up this morning, but the longer-term trend is bearish and market breadth was significantly negative yesterday.
Fixed Income: ~20:1 new lows to new highs
US Equities: ~40:1 new lows to new highs.

Variance is flattening but at a significantly higher level. It did not rise yesterday (lol) because the market fell then rose to close with a very small gain or loss. Intra-day moves were significant, ~2% yesterday, but the close paints the tape.

US Treasuries are stronger at the longer end (10-year and 30-year). Solid gains in long bonds. However, the short bonds are down, and short-term yields are up. 1-year US Treasury Yields were ~ 3.15%, which is higher than 10-year UST Yields of < 3%. This is a significant inversion of the yield curve and a 'harbinger of bad things to come.'  Harbinger...or sooth-sayer or oracle of doom *(recession, correction, decline).

Our black swan event on the horizon is war with Russia and NATO. We realize that sanctions against Russia are going to cause poverty and economic pain across Europe due to the cut-off in energy supplies (if it persists). Zero Hedge article naming Deutsche Bank article made me sad this morning. It shows Germans chopping wood, or burning books and furniture, to stay warm. That is poverty in action, and unrealistic. It just means cold, sickness and death across Europe. Let's hope the worlds reaches a peaceful settlement to the crisis in Ukraine, or a decisive and swift victory.

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By Jeffrey Cohen, Your Investment Advisor Representative
US Advanced Computing Infrastructure, Inc.
A non-discretionary investment advisor in Illinois.

We are very bearish on today's US Equities markets in this video. However, it is all 2nd order effects and macro-economic factors at this point.  Lots of indirect causes and malaise. We think the market has only one way to go in the short-term, and that is down to continue the bear market decline.

We discussed multiple issues.

• Inflation is up
• US Dollar is up
• Risk-free interest rates are up (short-term money for investors)
• US Treasuries bonds and notes are up, but bills are down.
• Economically sensitive commodities are down, but that could be due to being priced in USD, and not demand destruction.
• Corporate earnings for US companies with large investments in bonds and MBS, and companies that have significant operations globally will show lower earnings in Q2. This will not help stocks.
• Daily price volatility is up
• Fewer stocks in our CQNS UP run and more stocks in our CQNS Down run. This means that more stocks are falling from the equity equivalent of Investment Grade to High Yield
• Market Breadth (new lows vs. new highs) is showing continued weakness. It was around 19 new lows (fixed income and equities) for every 1 new high. That was consistent across fixed income and equities.

There is probably more that we discussed, such as our discussion with our daughter explaining how the government broke the US dollar and inflation is really high. It is bad for a 12-year old and her 19-year old sister. It is bad for everyone.

We worry that the US Federal Reserve and the US Federal Government won't do what it takes to correct inflation, and we worry that they will do what it takes to correct inflation. Unfortunately, by waiting too long and letting the market forces do the heavy lifting, they only have lose-lose options. Those options will cause widespread global poverty. It isn't a good choice.

We also worry that Russia will declare war on NATO. This is our black swan event concern and it will change things for the remainder of my lifetime, and likely most of yours.

Good luck in the markets today.
Jeffrey Cohen