7/9/2021 Job Reports and CPI Numbers: What It Means for the Month of June – Peak Capital Trading

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For the past 20 years, June has been one of the worst months of the
year with only 40% of the time being positive. Whether this year will
follow the trend is dependent on two major economic data: the job
report and the CPI.
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The job report that was released last week was lower than expected
with 559,000 new jobs added compared to 674,000 expected. This
slowed job numbers signals delayed tapering and a lower rates
environment for longer. This would mean a better environment for
growth stocks. In order to form a hypothesis, we need far more
decisive job numbers.

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7/9/2021 Job Reports and CPI Numbers: What It Means for the Month of June – Peak Capital Trading

Looking at the forward market and comparing it with treasuries, you

could see that the market is pricing in a rate hike sooner than what
initially was envisioned. The diversion between the forward rate and
the 1-3 year treasuries indicate that at least the participants in the
bond market, expect a raise sooner than later.

The Consumer Price Index (CPI) on June 10th is set to be one of the
most important dates for June. This is because CPI is one of the most
widely watched indicators as it measures the U.S. inflation rate. A high
CPI data means a higher inflation rate, and this would result in a
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7/9/2021 Job Reports and CPI Numbers: What It Means for the Month of June – Peak Capital Trading

faster rate hike. Currently, the consensus for CPI is 4.7% for May.
What matters the most here is any surprises in compare to the index.

As set out in the above chart, as we get closer to the moving averages
and the mean, we expect some correction in the market, primarily in
the Dow and in cyclicals. In addition, we believe unprofitable tech
plays such as Fastly, Spotify, Plug, and many others have even more
room to go down.

Looking at our own proprietary index of 10 most unprofitable

technology companies with the highest multiple, we can see while the
underperformance has been evidence, there is still a divergence
happening at a broader level.

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7/9/2021 Job Reports and CPI Numbers: What It Means for the Month of June – Peak Capital Trading

How to Invest in this Environment

Weak job number matched with a surprise to the down side on the CPI
numbers would mean an ideal situation for many of the growth plays
and QQQs in general. Weak numbers matched with surprise to the
upside on the CPI numbers mean continued strength in the Dow. What
happens at the end of this week will dictate our strategy for the month
of June

As always, please email me if there are any questions or concerns.

Ardi

By Ardi Aaziznia
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