Sell in May and Go Away

The week ended on June 19, 2026, interesting news items to look at for the past fortnight are:

Sell in May and Go Away: There is an age-old Wall Street adage that says, “Sell in May and Go Away” meaning that summer will follow and investors should close their books, have a bit of R&R then come back in November when action starts again. This adage certainly does not apply in 2026. (Fig. 1)

The fragile US/Iran Ceasefire MOU was finally electronically signed on Friday but not without Israeli sabotage of the deal through bombing in Lebanon. (Fig. 2).

 Washington was reluctant to officially disclose the details of the MOU but a senior U.S. Official read out loud on a conference call with reporters of what was purported to be the full text of the MOU. The official spoke on condition of anonymity under ground rules set by the White House. Details can be found in the link below: https://arabcenterdc.org/resource/memorandum-of-understanding-between-the-united-states-of-america-and-the-islamic-republic-of-iran/  .

In summary, the MOU contains:

(a) Military & Security - Full permanent ceasefire – Iran, the US, and allies halt all military operations on all fronts (including Lebanon).Respect for sovereignty – Both sides pledge non-interference in each other's internal affairs. Lifting blockade & troop withdrawal – US to lift naval blockade within 30 days; troops to withdraw from the region within 30 days after the final agreement is signed.

(b) Economy & Sanctions -  $300 billion reconstruction fund – Led by the US and allies (but the US will not contribute funds). Sanctions removal – Commitment to eventually terminate all sanctions; oil export waivers to be issued immediately after signing. Unfreezing assets – US to release roughly $24 billion in frozen Iranian assets after Iran fulfills its commitments.

(c) Nuclear & Implementation - Iran commits to “never build nuclear weapons" – Agrees to dilute existing high-enriched uranium, but key details are deferred to the 60-day talks. Status quo maintained – During negotiations, both sides keep the nuclear status quo; the US will not add new sanctions or troops. UN endorsement – Final agreement to be approved by a UN Security Council resolution.

On the surface, Iran had prevailed with its 14 points demand, the U.S. TACO and Israel put on its backfoot. The risks is whether the MOU would be implemented in full. The sudden and abrupt retreat by Trump begs the question of why. We have in the April 12 blog titled “Stone Age and Cease Fire” opined that a logical conclusion to the hostility should come in June and subsequently offered 4 areas of depletion that will lead to a US TACO. Another important milestone is that China restriction on exports of rare earths and critical minerals has begun to bite hard on the MIA in both the US and Japan. In the case of tungsten, which China controls over 80% of global supplies, not only are exports for military use restricted, but Chinese buyers have also moved to buy up scraps in US recycle yards to complete a chokehold against US weapons and munition manufacturing. (Fig. 3).

Without the ability to replenish its depleted armory, US may find it hard even to defend her own shores, much less to be a global bully with impugnity. One telltale sign of a more permanent peace in the ME is when the US aircraft carriers are pulled out; it would be difficult to send them back into the fray.  

(ii) Japan Re-militarization - China has moved against Japan in her military use of rare earths and critical minerals of Chinese origin. (Fig. 4)

Shin-Etsu Chemical has stopped accepting new orders for dysprosium-containing magnets, affecting high-end applications such as radar systems and electric vehicles. Kanto Denka & Central Glass: Have notified clients like Samsung of an indefinite suspension of production of tungsten hexafluoride (a critical chip material) starting July. Toyota & Panasonic: Rely on China for nearly 100% of the dysprosium (Dy) and terbium (Tb) used in their motors. If the supply cutoff persists, production lines could halt within weeks. A top executive at a major Japanese manufacturer has publicly warned that "factories may be forced to shut down." At the G7 meeting in France on June 16, Prime Minister Sanae Takaichi warned that China’s measures against Japan risked disrupting partner nations’ supply chains and called on G7 members and multilateral development banks to build more resilient mineral supply chains. G7 leaders agreed to coordinate stockpiling of critical minerals and reduce dependence on any single dominant supplier outside the G7. They also agreed to launch a new coordination platform with an expanded role for the International Energy Agency (IEA) to monitor markets and flag supply risks. Yes, all well and good for photo ops, but Takaichi truly left reeling.

(iii) Space X - Space X IPO was initially oversubscribed by only 2 times, but late institutional demand, on news of an end to the Iranian war, pushed demand to 3.5 times. There were every sign of Wall Street skimming the top at a very late hour of the tech bull run. Retail investors were allocated 30% (instead of the usual 5%-10%). The stock was fast-tracked into CRSP Index, MSCI-Global Standard, Basdaq-100, FTSE-Russell and S&P 500 without a waiting period, thereby ensuring that retail retirement funds heavily invest in passive investment vehicles like Index Funds and ETF were duly stuffed.  With the usual trick of over-allotment and early trading stabilization purchases, I am sure SPCX share price won’t disappoint for the first two weeks; thereafter, who knows.

(iv) Fed Chair Warsh first FOMC Meeting - Key Takeaways from the June 17, 2026 Meeting: (a) Rate Decision: The Fed maintained the status quo by holding rates steady. (b) No Dot Plot Projection: In a break from tradition, Warsh refrained from offering his own personal dot plot projections for interest-rate trajectories. (c) Hawkish Shift: Despite the pause, updated projections from other committee members indicated an increased belief that rate hikes could be on the horizon for 2026 to combat inflation, and (d) Market Reaction: The hawkish tone and emphasis on price stability caused a spike in Treasury yields, with the 2-year note experiencing its biggest jump on a Fed meeting day since March 2008.

Despite the rhetoric, after Warsh appointment, the Fed continued to expand its balance sheet and money supply. (Fig. 5).

My prognosis is US has a more pressing need to stabilize the dollar first; the bond market becomes secondary. US probably hopes that when oil prices come down as the ME ceasefire sets in, a lowering of interest rates may be opportune.

We have persistently presented our thesis that US Treasuries issuance has already passed a market saturation point and that a precipitation is a certainty. (Fig. 6).

Immediately after the FOMC meeting, gold and silver were heavily hammered in the derivatives market (Fig. 7).

This is despite foreign Central Banks contiued their buying spree to diversify away from dollar risks. (Fig. 8).

The Bullion Banks are in a panic as a fresh call by Trump to once again audit US Gold Reserves at Fort Knox. (Fig. 9).

It is understood that for every physical ounce of gold held by banks, there were customer claims of 147 ounces, and for every ounce of silver, 392 ounces of customer claims. (Fig. 10).

No doubt, there would not be many more opportunities for Bullion Banks to square off their naked short positions when some Gulf Council State Members are forced to liquidate their bullion holdings to pay for state admin expenses when their revenue are halted.

Philippians 4:4  Rejoice in the Lord always. Again I will say, rejoice! 5  Let your gentleness be known to all men. The Lord is at hand. 6  Be anxious for nothing, but in everything by prayer and supplication, with thanksgiving, let your requests be made known to God; 7  and the peace of God, which surpasses all understanding, will guard your hearts and minds through Christ Jesus. 8  Finally, brethren, whatever things are true, whatever things are noble, whatever things are just, whatever things are pure, whatever things are lovely, whatever things are of good report, if there is any virtue and if there is anything praiseworthy—meditate on these things9  The things which you learned and received and heard and saw in me, these do, and the God of peace will be with you.