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As earnings season got under way, the major U.S. stock indexes retreated slightly from the record highs they had set the previous week. The Dow slipped around 0.5%, the S&P 500 fell about 1.0%, and the NASDAQ declined 1.9%.   With summer upon us I have broken down this week’s news using quotes from the character responsible for 3 of the largest grossing summer blockbuster movies of all time, Darth Vader.


Be careful not to choke on your aspirations.

Small cap stocks which had been leading the markets higher coming out of the pandemic, have started to falter.  The more than 5% weekly decline in the Russell 2000 Index marked the fourth week in a row that the small-cap benchmark has lagged its large-cap counterpart by a wide margin. From June 11 through Friday’s close, the Russell 2000 Index has declined more than 7% versus a 1% gain for the large-cap Russell 1000 Index.

I find your lack of faith disturbing.

Federal Reserve Chairman Jerome Powell told a congressional panel that he still expects price pressures to ease later this year.  The testimony came after a monthly measure of U.S. consumer prices (CPI) rose at the fastest pace since 2008, rising 5.4% from the same period a year earlier. Many economists had expected the recent spike in inflation to moderate and it caused the markets to fall late in the week. Powell has repeatedly tried to calm markets and did so again in the wake of the latest monthly inflation measure.

You are unwise to lower your defenses.

The bond market rallied but remains dangerous.  This is an opportunity to reallocate out of bond funds, as long-term bonds will continue to be a bad investment. The yield of the 10-year U.S. Treasury bond tumbled below 1.29% on Thursday and closed the week around 1.30%. As recently as late March, the yield was 1.74%.

I am altering the deal. Pray I don’t alter it any further.

China may need to alter their growth projections.  The world’s second-largest economy has recently been recovering from the pandemic at a much slower pace than it had at the start of the year.  The reduction in the pace of growth now puts the Chinese government’s full year growth target economic growth target in jeopardy.  China recorded a 7.9% annual growth rate in this year’s second quarter, down from a record 18.3% rate in the first quarter.

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