U.S. Consumer Is Happier
1. Not too long ago, we got the preliminary reading on University of Michigan’s Consumer Sentiment – one of the top quoted sentiment consumer sentiment indicators.
It said Americans are slightly happier than they were in June. Compared to the same period a year ago, they are less happy.
Plus, Americans’ inflation expectations are coming down too – inflation expectations declined for second straight month.
Why is this important? Pessimistic consumer doesn’t go out and shop. And, a lot of times inflation actually becomes a expectation thing vs actual thing. Prices go up because people think prices will go up. Kinda like self-fulfilling prophecy.
6,200 On The S&P 500
2. Take a look at the S&P 500 chart, notice something interesting?
We are few weeks in July, and the index has been trading relatively sideways. Also, more importantly, 6,200 looks like some sort of floor. It has been defended so far this month.
So, now we know one level that’s important: 6,200. A move below it would welcome sellers. This month so far, any dip to 6200 has been bought hard. Something to keep in mind.
Don’t forget earnings season in play. Companies that have big weights will impact indices.
Crypto
3. Genius act passed. You didn’t have to be a genius to know that it would pass.
Here’s the thing though: this is being dubbed as a big win for the crypto market, and it might be. But, that doesn’t mean one should get complacent and forget even the most basic math.
Surely, some crypto could be mispriced and undervalued, however knowing your weights in the financial world is important. You are building a good portfolio, and having 80-90% weight on crypto is just recipe for some sleepless nights.
$NVDA has a market cap of $4.2 trillion vs crypto market cap at $3.88 trillion. 1 NVDA is more than the entire crypto market. Allocated wisely. That’s all.
Canada
4. Few things happening, and they need to be addressed.
First, PM Carney has said zero tariff deal isn’t likely. This means, tariffs are coming, and they are going to impact bunch of industries without a doubt.
Second, with inflation remaining sticky, bonds market is pricing in no cut in July either. This could have a lot of impact. With renewals in full swing, this has potential to hurt.
Lastly, recession calls for Canada are getting louder. Don’t be shocked if we are getting into stagflation period (likely there already). It’s painful. Also, I think it’s time to start looking the other way on Canadian economy – slowdown story is coming to an end this year, I think. 2026 brings some stability/flatness.
Investing 105
5. If you were given an opportunity take a rate of return of 10% compounded annually for 10 years versus rate of return that swings from -20% to 40% for 10 years, which one would you take?
I would take 10% without even thinking twice.
Why? In the second case, assuming you get year 1 swing of -20% and year two swing of 40%. Guess what’s your return? Its 12% for the two years, despite killing it in the year two. Assuming you get -20% in the third year, your average return is “Zero”, but you are down.
Consistency over time is super important.