Monday, March 14, 2022

Morning Note: Fed's Meeting, Commodities Retreating

Well, the Fed holds its much-anticipated March meeting this week, and they've virtually assured that a formal tightening cycle is about to begin.  All indications suggest that a .25% bump in the Fed funds rate will be announced; we'll see what they have to say about the future of their enormously bloated balance sheet. Make no mistake, the financial markets will be hanging on every word, particularly those of Chairman Powell during the presser.

US equities are kinda mixed to start the week, Europe's catching a very nice bid, emerging Asia is being rocked by covid lockdowns in China along with SEC threats to some Chinese tech heavyweights, while commodities are taking a bit of a beating to start the week (as anticipated, per our latest video commentaries).

With regard to commodities, as I've stated, while we fully expect some near-term pain as they come down off of what has been an impressive start-to-the-year rally, we, for a variety of reasons, remain quite bullish over the long-run. As does our global research partner BCA.

Below they touch on the Russia/Ukraine impact, and on last week's news out of Europe that "massive" spending on energy and military is on the way:

"Energy markets – broadly defined to include oil, gas and coal along with the base metals required for renewables and their supporting grids and electric vehicles – are being rocked by Russia's war with Ukraine."
Base metals, in particular, will have to find price levels that destroy demand among competing uses, if the EU's dual-track plan to build out its renewables generation and restore a military capability is approved.

A "massive" funding effort in Europe, coupled with equally massive efforts in the US and China – both intent on building out their renewable generation and grids, as well as expanding their defensive capabilities – will be extremely difficult to pull off. Critical base metals inventories remain low, and prices are high because demand exceeds supply for the foreseeable future." 


Asian equities struggled overnight, with 11 of the 16 markets we track closing lower.

Europe's in rally mode this morning, with all but 17 of the 19 bourses we follow in the green as I type.

US equities have now moved into the green on the session: Dow up 278 points (0.84%), SP500 up 0.69%, SP500 Equal Weight up 0.68%, Nasdaq 100 up 0.53%, Nasdaq Comp up 0.46%, Russell 2000 up 0.08%.

The VIX sits at 30.61, down 0.46%.

Oil futures are down 8.02%, gold's down 1.45%, silver's down 3.25%, copper futures are down 2.21% and the ag complex (DBA) is down 0.55%.

The 10-year treasury is down (yield up) and the dollar is down 0.30%.

Among our 38 core positions (excluding cash and short-term bond ETF), 21 -- led by PARA (formerly Viacom), Nokia, Eurozone equities and carbon credits -- are in the green so far this morning. The losers are being led lower by uranium miners, metals miners, energy stocks, silver and solar stocks.

“ The really hard thing to seize is that the last 40 years may have been The Anomaly. Such a long period of order free of worldwide chaos. Unrecognizable to seasoned wall st players if you extracted them from the 1950s or 60s or 70s to the present day, or the days pre covid...”
--Hugh Hendry

Have a great day!

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