[Platinum Insights] (6.12.23)

Good morning.  

US stock futures remained cautious on Monday as investors brace for the latest inflation data and the Federal Reserve’s policy meeting this week. Investors are hopeful that inflationary pressures would show further signs of easing, supporting the case for a pause in the Fed’s interest rate hikes this week and maybe even in July.  

Deutsche Bank notes that historically, the Federal Reserve starts to ease policy when the willingness to lend as measured by an index in the closely watched Senior Loan Officer Opinion Survey nears zero. That measure is now deep in negative territory.  

Companies are starting to feel the pinch from tighter lending conditions and costlier funding. Deutsche Bank expects an imminent default wave, with a peak in the fourth quarter of 2024. It forecasts peak default rates on U.S. loans will near an all-time high at 11.3%.  

The US inflation rate is forecasted to fall 4.1% in May, the lowest since March 2021, from 4.9% in April while the core gauge may decelerate to 5.2% from 5.5%. The U.S. Treasury yield curve remains deeply inverted, meaning longer-dated borrowing costs are lower than shorter-dated ones — a gold-plated recession signal.  

“I think [this week] is almost one of these big comeuppance moments because if the Fed essentially acknowledges that there’s been progress on inflation, we have a June pause and maybe even a July pause, I think it’s going to be a green light for some of those groups to finally get a bid,” Fundstrat’s Tom Lee said Friday on CNBC’s “Closing Bell.”  

WTI crude futures fell to below $69 per barrel. Gold fell below $1,960 an ounce while the yield on the US 10-year Treasury note rose above 3.75%.  

Have a great day!