It was a disaster for history books, with the benchmark falling 21% in the first six months of the year – the longest since 1970. Superstitions continued to pile up on Wall Street, with U.S. returns 10 years to fall to about 3% from a high of 3.5% in mid-June. The dollar had its best quarter since 2016. The nearly 60% drop in Bitcoin since late March was the largest since the third quarter of 2011. US consumer spending fell for the first time this year, suggesting an economy on a somewhat weaker footing than previously thought amid rapid inflation and rising Federal Reserve growth. The view that central banks should act quickly because they misjudged inflation has upset markets, with traders raising bets that the economy will bend under an aggressive tightening. “The stagnant inflation that has gripped our country right now will make it tough on the stock market in the medium term,” said Matt Maley, market strategy manager at Miller Tabak. “When demand is not the main reason why inflation is a problem, a slower economy is not going to help reduce inflation, as some experts seem to believe.” Key segments of the world’s largest bond market – such as the five-year and 10-year yields – have been reversed, signaling bets that higher interest rates will hurt the economy. Reversals have generally preceded the recession by about six to 18 months, according to data compiled by Bloomberg. After a rough first half of the year, July will be pivotal for the future direction of markets amid corporate earnings, key inflation data and the Fed meeting, according to Greg Marcus, chief executive of UBS Private Wealth Management. He says instability is likely to remain high until there are signs that inflation is easing, the risks of recession are easing and geopolitical threats are easing. In recent months, a strategy that has worked well for a decade has met with new lows in the market. Traders have avoided the “buy-the-dip” mantra while adopting the “sell-the-rally” function. As a result, the S&P 500 entered the bear market for the second time since 2020, having sunk more than 20% since its peak in January. But the sad performance is not an indication of what is to follow. The US stock index lost 21% in the first half of 1970, during a period of high inflation against which the current environment was compared. It gained 27% in the last six months of the same year. “We will have double-digit returns from now until the end of the year,” Jonathan Golub, head of US equities strategy at Credit Suisse, told Bloomberg Television. “We do not have a profit problem as people say.” Earlier this week, Goldman Sachs Group Inc. strategy analysts They noted that the US earnings margin estimates are very optimistic, putting stocks at risk of further decline when Wall Street analysts lower their expectations. Morgan Stanley’s Lisa Shalett said Monday that analysts need a reality check on their quarterly earnings forecasts. Elsewhere, oil suffered its first monthly slide since November, as OPEC + completed the return of production that stopped during the pandemic. Gold is falling for the third consecutive month.

What to watch this week:

Eurozone CPI, Friday US Construction Costs, ISM Manufacturing, Friday

Some of the main movements in the markets:

inventories

The S&P 500 fell 0.9% at 4 p.m. New York time Nasdaq 100 fell 1.3% Dow Jones industrial average fell 0.8% MSCI World Index fell 1%

currency

Bloomberg Dollar Spot Index fell 0.4% The euro rose 0.4% to $ 1.0481 The British pound rose 0.4% to $ 1.2173 The Japanese yen rose 0.6% to 135.74 yen per dollar

Links

The yield on 10-year bonds fell seven basis points to 3.02% Germany’s 10-year yield fell 18 basis points to 1.34% Britain’s 10-year yield fell 16 basis points to 2.23%

Goods

West Texas Intermediate crude fell 3.6% to $ 105.82 a barrel Gold futures fell 0.6% to $ 1,807.30 an ounce

– With the help of Andreea Papuc, Denitsa Tsekova, Cecile Gutscher, Lu Wang, Elaine Chen, Isabelle Lee, Vildana Hajric and Enrique Roces.