Monday, March 28, 2022

Morning Note: Much to Watch!

Like I said in the weekend economic update, we hold no delusions with regard to commodities right here. Meaning, while we remain notably bullish on their go-forward prospects, they've run up a lot over a short period of time and, among other potential catalysts, any hint at peace in Europe would have them indeed pairing a chunk of those gains. Note that we turned bullish commodities well before the invasion.

The market sees real hope that this week's in-person talks will yield a breakthrough on the war front. Let's hope, for reasons far more important than markets, that the market is onto something!

While the above news is indeed doing a number on commodities this morning, interestingly, it's not inspiring a strong rally (at least not at the moment) in US equities. Europe on the other hand, as we would expect, is seeing stocks higher as I type.

Also in the weekend video, I mentioned deteriorating consumer sentiment along with a waning in the rate of change in retail sales. Bloomberg's Lisa Abramowicz penned a thoughtful piece published this morning titled American Consumers Are Starting to Hit Their Breaking Point; Evidence is mounting that the days of pandemic-era profligate spending may be over in a bad sign for stocks and corporate bonds.

Here's a snippet:

"Signs are emerging that the resilience of American consumers is rapidly waning, potentially undermining one of the few remaining pillars supporting the bull market in equities.

U.S. households have until recently mostly absorbed higher prices on everything from coffee to chicken to clothes, helping companies maintain fat profit margins despite higher input. But that doesn’t mean consumers were happy about paying more for the same goods, which is why the University of Michigan’s sentiment index has steadily deteriorated to the lowest since 2011."

Clearly, there's much to keep our eyes on going forward!!

Asian equities leaned slightly green overnight, with 9 of the 16 markets we track closing higher.

Europe's in rally mode this morning, with all but 2 of the 19 bourses we follow trading higher as I type.

While US major averages are starting the week mixed, the underlying tone (with all but 3 sectors in the red) is decidedly negative: Dow down 100 points (0.31%), SP500 up 0.03%, SP500 Equal Weight down 0.34%, Nasdaq 100 up 0.61%, Nasdaq Comp up 0.50%, Russell 2000 down 0.58%.

The VIX sits at 21.61, up 3.70%.

Oil futures are down 7.79%, gold's down 0.79%, silver's down 1.83%, copper futures are up 0.06% and the ag complex (DBA) is down 1.80%.

The 10-year treasury is up (yield down) and the dollar is up 0.49%.

Among our 37 core positions (excluding cash and short-term bond ETF), 8 -- led by carbon credits, South Korean equities, German equities, tech, healthcare and solar stocks -- are in the green so far this morning. The losers are being led lower by energy companies, base metals miners, uranium miners, silver and ag futures.

"If you get the big ideas right, the small details tend to fall into place more easily." 
--Roche, Cullen. Pragmatic Capitalism

Have a great day!

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