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“You will never achieve success by insuring against failure.” – Patrick Stewart

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Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

US equity futures are red across the board to kick off the week. The Nasdaq is on pace to gap down 1% while the S&P 500 is looking at a more modest decline of 0.35%. Factors contributing to the decline include escalating tensions between the US and Iran, as well as a plunge in South Korean stocks. Treasury yields are modestly higher, with the 10-year yielding 4.59%, while WTI rallies more than 3% to $73.80. Gold is down more than 1% and just over 1% above, breaking below $4,000 per ounce, while Bitcoin is down over 2% to $62,800.

Asian stocks mostly started the week with sharp losses. The Nikkei fell 1.9%, while the Shanghai Composite dropped slightly more at 2.1%. Neither of these, though, came close to the 9% decline in South Korea’s KOSPI. The weakness came despite data showing exports surged 54% y/y, driven by a more than tripling of semiconductors. European equities aren’t seeing nearly the magnitude of weakness that Asia experienced. The STOXX 600 is down just 0.1% while most major benchmarks trade slightly higher.

There’s little in the way of data to start the week, but action will really heat up Tuesday with June CPI, Congressional testimony from Fed Chair Warsh, and most importantly, earnings results from the major banks, including Bank of America (BAC), Citi (C), Goldman (GS), JP Morgan (JPM), and Wells Fargo (WFC).

Volatility in memory stocks remains the story of the day in stock markets, and nowhere is that more on display than in South Korea’s KOSPI. The index fell nearly 9% to kick off the week as stocks like SK Hynix fell by double-digit percentages, even after Friday’s successful IPO of the company’s ADRs. Since its high three weeks ago, the KOSPI has lost more than a quarter of its value in what has been one of the largest three-week declines in the index’s history. The last time the KOSPI lost more than a quarter of its value this fast was in March 2020 during the COVID crash.

What’s amazing about this recent crash in South Korean equities is that the index is still 23% above its 200-day moving average. It’s rare to see a major international benchmark index trade well into bear market territory but still be so elevated relative to its 200-DMA.

The chart below shows the KOSPI’s 200-DMA spread going back to 1980 and shows just how extended the index had become. In early June, the South Korean benchmark was more than 80% above its 200-DMA. After the recent plunge, though, the 23% spread still ranks in the 91st percentile relative to all other periods since 1980.

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