[Chart courtesy of MarketWatch.com]
1. Moving the Markets
Equities maintained their newly found upward momentum and rallied for the third day in a row by putting the Brexit sell-off in the rear view mirror and making up almost all losses. In the end, the S&P 500 closed out June just about unchanged.
The assists of the day came from the BOE and ECB via hints that more QE may be forthcoming this summer. That’s all it took and the major indexes recorded their best three-day climb since February 17. Of course, quarterly window dressing added to the overall positive tone.
As I have repeatedly posted, the Central Banks own the stock market, and they control its direction via soothing or accommodating statements designed to elevate the indexes to their desired level no matter how horrific the underlying economic data points are.
My view is that sooner or later some reality will set in, no matter what the jawboning, and equities will correct. It may take just one major trigger like, for example, the Italian banking system imploding or, the mother of all derivatives, Deutsche Bank, which stock price is sliding towards single digits, making its best Lehman Brothers imitation, and we will have a crisis on our hands along the lines of 2008. To me, it’s not a matter of “if” but simply “when.” Be prepared by having an exit strategy in place.