ζ Portfolio Update: August/26 Rebalancing
July Broke the Market’s Old Map
ζ Portfolio Update: August/26 Rebalancing
July Broke the Market’s Old Map
Mag 7 Lags as Real Estate Hits Multi-Year Highs
Is the Magnificent 7 done leading?
Not entirely, the cycle is positive for the most of them, but Alphabet GOOG 0.00%↑ and Tesla TSLA 0.00%↑ initiated the downtrend. And the market this month replaced them. Leadership moved to real estate while the index held its above-average year without them.
The S&P 500 SPY 0.00%↑ $SPX entered July off one of the best quarters in its history.
The month turned lower on the U.S. and Iran conflict, with the Magnificent 7 underperforming again.
Real estate VNQ 0.00%↑ securities went the other way, making multi-year highs and moving into the top performers of the year.
Emerging markets EEM 0.00%↑ fell, but not far enough to turn their uptrend down. It was dragged by tech in Taiwan, South Korea and China.
7 stocks lagging while a different asset class carried the month, and what leadership is worth in the year it rotates to the corner nobody was tracking.
30-Year Treasury Yield Hits 19-Year High of 5.238%
Is there anywhere left to hide in bonds?
No. Duration hid nothing in July, and the only thing that worked was real estate.
The 30-year U.S. Treasury yield hit 5.238% at the end of July, a 19-year high.
Bond prices fell through the month, entrenching downtrends already in place.
Equities fell in the same month and real estate securities made multi-year highs.
Metals prices declined and the U.S. Dollar surged.
19 years of yield history cleared in a month when stocks fell too, and what a hedge is worth once it stops moving against the thing it hedges.
PCE Inflation Cools to 3.7%, Still Above 2% Goal
Is inflation actually coming down?
Yes at the headline, no underneath. Energy delivered the entire drop and core is sitting where it was.
PCE inflation ran at 3.7% over the 12 months through June, down from 4.1% in May.
The index itself fell 0.1% in June, almost entirely because energy prices dropped.
Excluding food and energy, prices rose 0.1% in the month, leaving 12-month core at 3.3% against 3.4% in May.
Energy did the work in June. Core moved 0.1 point.
0.4 points off the headline on falling energy, 1.3 points still between core and the 2% goal, and what a target is worth after a year spent above it.
Fed Holds Rates 9-3 as 3 Officials Vote to Hike
Will the Fed hike in September?
Yes. 72.1% of probability of It.
The Fed held at 3.5% to 3.75% on July 29, 3 years since its last increase.
The vote was 9-3, and the statement was identical to June’s.
Money markets had priced about a 1 in 3 chance of an increase at that meeting.
3 officials wanted a hike. The other 9 changed nothing, including the wording.
3 dissents against an unchanged statement, and what 3 years without a hike is worth to a market repricing its own odds by the week.
Median Home Price Hits Record $440,600 in June
Is housing finally going to break?
No. It is not breaking, it is stalling, and it has been stalling since rates rose in 2022.
The national median existing-home price hit a record $440,600 in June, up 1.8% on the year.
The 30-year mortgage rate hit 6.76% in late July, the highest in a year, after dipping under 6% in February.
Pending home sales fell 1.7% in a single week to their lowest since early April.
Prices at a record. Sales in the 4th year of a slump.
A record price and April lows in sales in the same month, and what 6.76% is worth to a market that has not cleared in 4 years.
SpaceX Falls Below $135 IPO Price, Nearly 50% Off High
Did everyone miss SpaceX?
No. Nobody missed anything, and whoever caught it at the high is holding a 50% drawdown.
SpaceX SPCX 0.00%↑ , one of the most anticipated offerings in market history, priced at $135 and traded as high as $225 within days of its June open.
By the end of July it was below the offer price and nearly 50% under its post-IPO high.
Since 2019 the average IPO has underperformed the broader market over the 3 years after listing.
$225 in June. Below $135 in July.
A 50% drawdown 6 weeks after the loudest debut of the year, and what 3 years of average IPO underperformance is worth against the fear of missing one.
Enter the Decision Room ↓
Enter the Decision Room.
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Inside each session, Dan Castro works through current market prints and explains how the framework is applied to real conditions.
You see:
How the cycle is interpreted
Which data matters
Which signals are ignored
How risk changes the conclusion
How an opportunity becomes a portfolio decision