Commodities: Latest Market News

Trading is one of the most difficult jobs ever because you need to constantly adapt to unforeseeable external factors that affect your initial judgement without emotional attachment and it’s also the only job where you can lose money while working.

The year 2022 taught us an invaluable lesson: “invest while adopting an active portfolio management”. Old school investing rules like “Buy & Hold forever” or “Mix portfolio with 60% Stocks & 40% Bonds” are now deprecated and who followed them has now an insurmountable lose that will take years to recover to its initial values. I’m advocating to allocate the assets to certain economic sectors that will work in the near future.

This year was the case of Energy, Commodities & Consumer samples sectors, also REITs in the first half of the year. In the last two years, the investors had switched from Growth to Value & Dividend Stocks.

Our main target is to outperform the best funds that have a 60% to 80% allocation of assets in Stocks and, if it’s possible, the S&P500.

These funds are:

• FBALX Fidelity® Balanced Fund with 29.5% decline in unit fund year to date
• VBIAX Vanguard Balanced Index Fund with 18.3% decline in unit fund year to date
• FFFEX Fidelity Freedom® 2030 Fund with 22.3% decline in unit fund year to date
• VWELX Vanguard Wellington™ Fund with 20% decline in unit fund year to date
• RBAIX T. Rowe Price Balanced Fund with 19% decline in unit fund year to date

The funds above are the best US funds according to Money US News.

Instead of negative -1,8% yield performance, our balanced portfolio is outperforming the S&P and the funds mentioned above, also is well positioned if the market recovers, and also has an active hedge against future market drops. Just take a look on the Performance & Allocation Graphs below, screen captures from our broker IBKR (Interactive Broker) account.

On the graph, Others (orange) are funds in Precious Metals and Commodity.

Two major macroeconomic triggers forced us to adapt our investing strategy this year: the global energy crisis due to the Ukraine – Russia War and the Fed aggressive interest rate hiking followed by other Central Banks. We maintain a strong 💪 position into Precious Metals and Commodities Stocks & Funds but we are ready to adapt if the Fed changes its policy. The buy & hold strategy worked two decades ago until now because of the ultra-low Fed policy and the cheap money.

What to expect from 2023 Markets

2023 is going to be a challenging year and will require a solid analysis, a fast adaptive strategy, and a lot of patience. Volatility will grow and we will have lots of ups & downs in all market sectors. Investing in risky assets during such times is not pleasant.

1) Stock Market Evolution in 2023

It’s difficult to say how stock market will evolve in the next year because we have positive and also negatives factors that both can influence markets in 2023.

Because I’m a positive person, I will start with the positive catalysts:

• The November CPI index finally signalled that will start to peak decline in inflation that the markets were so eagerly awaiting. The Fed, despite the rate rises in 2022, should sometime in the second quarter begin to set the exit point of their very aggressive monetary policy. The Fed raised rates to 4.5% in December, and the so-called famous "pivot," should come between 5% and 5.5%. That was the reason for the market recovery in December.
• Ending of the Ukraine – Russia War will have a positive effect on stock markets.
• China ending 0 Covid Policy announced by leader XI JINPING will have strong 💪 effects on international stock markets but most on the Asian Markets.
• Widespread decline in major asset classes.
• While maintained, the current net spending by the US Government will have a positive effect (EV Markets, Green Energy Act).
• Also, the Fed high rate will have a positive effect on the banking system socks.

On the other hand, the negative catalysts are in greater number:

• Corporate earnings are the main source of risk for stocks. We expect lower earnings because of the inflationary environment.
• Corporate Profit Margins will drop next year because right now we are at 👆 its highest levels. Corporate profit margins sit at their most elevated level in the last 70 years and this must be changed because consumers will stop spending sooner than later.
• Treasury yield curves remain deeply inverted worldwide and that is one of the most important indicators that bottom is not in the cards for 2023.
• Equity Exposure it’s still at highest level compared to previous recessions; we expect another 20% drawdown to have optimal level to enter the market.
• All Professional Economic Forecasters are pointing to recession into 2023:
  • Philadelphia Fed Survey of Professional Forecasters pointing 46.5 % to recession: https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q4-2022
  • WSJ Economic Forecasting Survey - 65% of voters see recession: https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q4-2022
  • Bloomberg Monthly Survey of Economists says 98% recession only 2% view a soft landing: https://www.bloomberg.com/news/articles/2022-11-23/fed-staff-saw-odds-of-us-recession-in-next-year-as-about-50-50?sref=38CcBIjZ&leadSource=uverify%20wall
  • Corporate Executives: Expectations of Recession are at the highest levels among KMPG Seniors and Bank of America Analysts
• Supply shortages and supply chain disruptions from government Covid-19 policies can’t be solved by the Fed and will have a real impact on inflation. These issues need more ⌚ time to be solved.

Successful investing is a marathon, not a sprint. I believe in a well-diversified portfolio in different sectors and we should also consider diversification within those sectors. I look for value, trends and under known/owned stocks; my advices to 2023 allocation of stocks are:

1. Value will continue to outperform Growth
2. Small caps will outperform large caps
3. Emerging Markets will outperform US markets
4. Precious metals & Commodities will outperform Stocks

2) Commodities Markets

Coal and Gas markets were poised with strong gains after a global energy crisis triggered by the Russia – Ukraine War, while tighter supplies expected in 2023 could fuel more gains. If Ukraine will win the war against Russia, and Russia will also lose the Crimea, then we have a smaller possibility that Russians will start to pump oil & gas again. This scenario has a low probability of approx. 10% and seems unlikely to happen because a change of the Russia regime is needed. Much more likely to happen is that we’ll have a frozen conflict with military advantage of the Ukrainian side and without a political regime change in Russia. From this point of view, we are positive on energy market with 60% of confidence. We don’t consider a larger percent of confidence because of the new China Covid-19 outbreak that will pose a serious threat to growth.

Our view is bolted by Goldman Sachs in their last memo:

"Despite the recent price declines, commodities will still likely finish the year as the best performing asset class. From a fundamental perspective, the setup for most commodities next year is more bullish than it has been at any point since we first highlighted the supercycle in October 2020."

Price of Food will soar because the invasion reduced supply from the key grain exporter Ukraine to a global market already driven higher by adverse weather and COVID-19 related restrictions. Corn and soybeans hit a decade high-prices climbed to an all-time record.

3) Precious Metals Markets

We are positive on gold markets because of the following factors:

• Further weakening of the dollar as inflation recedes its positive for Gold
• Geopolitical conflicts are also a good catalyst for Gold
• Economic growth in China, after two years and half of lockdown, next year will improve Gold
• Further weakening of the dollar as inflation recedes would provide support for Gold

You can read more in our previous articles https://topfxinvest.com/blog/markets-are-too-optimistic-about-the-fed-slow-pace-of-rate-hike

Silver will have also a very good evolution of price if the soft landing of markets and industrial sector will start to grow.

Gold & Silver are the ultimate ways to preserves value right now.

This article highlights our view for 2023 Market evolution and we want to wish you a profitable New Year in good health and working force.

For the year 2023 we plan to introduce a Stock Recommendation Service for investors and other facilities on our website.

To your success!
TopFxInvest Team

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Energy sector it’s the best performing market sector in 2022 instead of the latest evolution of Oil. Evolution of energy sector its close correlated with war between Russia & Ukraine. But we need to recap last week’s events:

Russia shut down its Nord Stream 1 natural gas pipeline last week for “maintenance” and will thereby provide Europe with a preview of how will looks winter this year. Instead of opening terminal in Estonia from Norway and new delivery from Spain, or imports from Canada & Qatar Europe can’t replace completely Russian energy and Europeans will have higher bills for energy-related products. Its expected price caps but this will result in more shortage of Gas & Oil.

There is a growing possibility in the case of a regime change in Russia that could disrupt the crude oil and natural gas markets. We support this idea because of latest development of war, Ukrainian soldiers regain 6000 KM². Also, six of Putin’s allies have been shot or blown up, so Putin’s inner circle is becoming increasingly isolated. “Special operation” support is lowering because of Europe sanctions from 85% to 68% according to Levada.ru.

In the event that there is a ceasefire between Russia and Ukraine, post-Putin, the stock market could explode 40% to the upside. However, as long as Putin remains in power, the Ukrainian war is expected to persist in a long, and we will have high price of energy. We reduce our profitable positions this week in anticipation of pervious scenario.

After last days of Ukrainian Army advance we can see already a turning point of conflict. Just take a look of yesterday map:

We closed some energy positions like Alvopetro (Alvof) with +40% and Petroleo Brasil (PBA) +30% opened in March because we had important gains from price appreciation and large dividends, with higher risk of president Jair Bolsonaro intervention in companies’ administration.

We anticipate Corporate Earnings to decline except Energy. We remain skeptical that a new Iranian nuclear deal will be announced in the upcoming weeks because this will affect Bidden administration and relationship between USA and Israel.

What About US Inflation

U.S. inflation may have peaked, but at high levels thus forcing the Fed to remain restrictive. Strong dollar, high mortgage rates, lower commodity prices, lower demand, and reduced supply chain pressures are likely to help reduce inflation over the next year. The U.S. dollar should stabilize over the medium-term amid hawkishness from other central banks and slowing economic data this is positive for growth stocks in short term. Right now, CPI was published and is above expected values but market overreacted this bad news. Today’s CPI report wasn’t a game changer. A “better balance” in the labor market would be a game changer for CPI next months because higher vacancies-to-unemployment ratio fuels inflation.

Just read Societe Generale opinion below:

Societe Generale Research discusses the USD outlook and sees the currency rally close to its peak. "Aggressive fiscal reaction to higher energy prices encourages our belief that while the euro and pound won’t stage significant rallies until the we’re closer to the end of the energy crisis (and the end of the war in Ukraine), the dollar’s peak isn’t very far away," SocGen notes. "A period of EUR/USD and GBP/USD trading in low ranges is more likely than fresh 10% fall from here and it’s much more likely the next 10% move in USD/JPY is down, rather than up, too," SocGen adds.

We can see at the end of the year decline in USD and we acquired new positions on Gold, Silver and Banks European Index (EXX1), also new positions in Citi (C) Societe Generale Bank (GLE).

Right now, we have a late cycle development and we prefer equities instead of fixed income like bonds. Not all equities are good to own right now, we select just strong companies with large cash flow from sectors like Healthcare, Consumer Samples and Utilities, Renewable Energy. We favor commodity and companies that mine uranium and lithium for green Energy Industry.

Good green Companies:

Best Lithium Producers

• Albemarle Corporation (NYSE:ALB:US)
• Jiangxi Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460)
• Lithium America Corp (LAC)
• Sociedad Quimica y Minera S.A. (NYSE:SQM:US)
• Allkem (ASX:AKE, OTC Pink:OROCF)

Some of the problems that markets will have to face in the near future:

• Increased food and energy prices are causing acute trade imbalances and civil disorder in the most vulnerable countries. Europe will enter to recession.
• China, COVID pandemic continues, massively affecting its economy. Simultaneously, the Chinese property complex – key to Chinese economic growth – is now under dire stress.
• Greatest fiscal tightening in history as governments withdraw COVID stimulus will impact companies’ margins and profitability.
• Population decline will pose threats to economic growths. No single G7 country’s is producing new born at replacement rate.
• Climate problems, higher temperatures, on all continents will have a major impact for agriculture next years.

We see now all vectors for an epic super-bubble because all of the assets, stocks, bonds, houses are overvalued. Right now we experience first stages with inflation and interest’s rates surge but will have sooner than later lower corporate margins and unemployment.

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After big rates hike by FED and ECB, investors are hoping that in the following year, central banks will start to normalize rates, therefore Stock market show a bounce back (SPX is near 4.000).

We think it’s a short-lived bounce but a good opportunity for a Risk-Off trade. We see volatility ahead, after rate hikes, because central banks (FED & ECB) are captive to higher inflation. But inflation is caused by production constraints, wars - and rate rises don’t fix these. If inflation was caused by higher demand, than a rate hike, normally, will have a better outcome.

Getting inflation down to the magical number of 2% would mean recession without any doubt and first half year is showing us that GDP is crushed with a 1.6% contraction. Monetary policy is working with delays and the economy is just feeling the effects of one of the most aggressive hiking cycles in history. Stocks rallied 2-4% each of the last four times, the FED hiked interest rates only to fall in the following weeks. Stocks are still expensive and financial results are disappointing, but investors are thinking that this is the bottom, but we cannot embrace this idea. We will face ugly consequences because interest rates were kept too low for too long time (over a decade), central bankers are responsible for the fact that right now we have a bubble on each economy branch.

Mr. Powel must act in same way as Volcker did few decades ago in 1979 and hike until inflation will land to normal values. His last speech was a hint to more rate hikes.

Do you believe that we will face a soft landing as Powell said few weeks ago?

We believe that we will face a soft landing in the same way that inflation “was transitory” last year, according to Powell (just read our January 2022 article at: https://topfxinvest.com/blog/thoughts-about-the-2022-bear-market). Mr. Powell also opined that we aren’t in a recession, demonstrating again that the leader of the most powerful central bank in the world is the last person you would want to ask about the economy. Last week, economy suffered its second consecutive quarter of negative real growth and there is little reason to expect the third quarter will be any better.

Natixis Investments Managers see higher risks of a recession in the last survey. 64% said that recession is a distinct probability, and 24% said that recession it’s inevitable. Almost six in ten (58%) believe value will continue to outperform growth for at least a few more months, while nearly one-quarter (24%) think value will be on top for a few more years.

"The End of an Era"

Strategists see a world that has changed dramatically in the past six months. After a decade in which the easy money provided by quantitative easing, low rates, and low inflation propelled markets to positive gains in seven out of ten years, the world is moving on. This next normal is marked with greater volatility and greater uncertainty. The big question for most investors may well be: How long will it last?”

If you want to read more about the survey: https://www.im.natixis.com/us/markets/the-end-of-easy-money

Inflation is a brutal and merciless way of resolving structural debt & imbalances of corrupted governments. We see potentially multiple series of inflation & deflationary cycles within short time frames (six month & two years) that will cause huge volatility.

According to CNBC, inflation is a top problem in US.

Traditional investing style (60% stocks + 40% bonds) it’s not a solution today, because bond’s market is underperforming and stocks are crushed.

How to protect your portfolio during these times?!

We can protect from the financial storm that is arriving by choosing the best stocks & ETFs from few market segments that will perform in difficult times:

Commodities: since prices already dropped off and would be a good hedge against risk-off tone. Symbols: CRN, DCUSAS, WY

Carbon Emission: KRBN, CARB, GRN, NETZ

Consumer Staples Funds: WCOS, XLP, VDC, FSTA, YI 111, INC, IBA, IMB

Real Estate REIT: STOR, O, NNN, SRC, UBA, ID.UN, APR.UN

Precious METALS: ZGLDUS, ZSILUS

Low debt & Cash flow Green Energy Stocks

You must avoid at any price Growth Stocks & Crypto Markets.

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Global growth fears are growing immensely this week and recession fears are at top levels, it seems that bust is coming shortly. According to our last market view, an economic hurricane is coming, and the last week economic outlook is worsening.

Just read some title news from Reuters:

“U.S. retailers tumble after Walmart cuts profit forecast … Walmart cut its forecast for full-year profit, saying it expects its adjusted earnings per share to drop as much as 13%”

“Logitech's quarterly profit slumps 38% as pandemic demand wanes … reported a 38% fall in first-quarter adjusted profit and cut its full-year 2023 outlook on Tuesday”

“some tech companies firing workers in an attempt to reduce costs: OneTrust fired 900 employees, Stitch Fix cuts 330 ID.me dismissed 330 according to CBSNews https://www.cbsnews.com/news/tech-companies-layoffs-stock-market-cryptocurrency/”

JP Morgan CEO Jamie Dimon is telling us that an economic hurricane is coming: “Things are doing fine. Everyone thinks the FED can handle this. That hurricane is right out there down the road, coming our way. We just don’t know if it's a minor one or Superstorm Sandy.”

Other macroeconomic vectors are pointing to a recession, below you will find just a couple of them:

• Credit default swaps have nearly doubled so far in 2022
• High yield bond market is pointing to a recession because spread between junk bonds and treasuries surge from 300 to 500 points in 2022

• US consumers Sentiment is pointing down to a level similar to levels of Great Recession

• Atlanta GDP is now pointing to an annualized real GDP growth of just 0% for the second quarter

In the past, the increase in the money supply and the low policy interests of FED resulted in a credit boost, while the increased interest rates at the present moment will force many contractors to abandon their projects.

We prefer keeping defensive stocks and, first of all, precious metals. Our portfolio is holding 40% from total assets in Gold & Silver.

Gold will rocket because of factors mentioned above, and 1710 it’s a good price to add to your portfolio.

How to store Gold Best and Safest way?

Because many of our readers asked how to store Gold, I’ll beat the horses on that subject.

The safest way to store Gold is to buy physical Gold and to store it on offshore companies like https://hardassetsalliance.com/. While being safest premium, it’s not too economically because prices are not cheap and it’s suitable for large long-term investor with over 500K. For small investors, the best way to invest in Gold is to buy GOLD ETF in safest jurisdictions like Switzerland and Singapore. Largest Gold ETF have some disadvantages that are not always easy to identify but, for the moment, we will show our requirements on how to choose the best GOLD ETF:

• It must be placed in the safest jurisdiction and in a safe location
• The Gold ETF must be 100% backed by physical Gold, and investors ultimately should own a share of the stored gold bullion
• The Gold ETF must have a decent size and liquidity
• Must have reasonably fees
• Must have low tracking errors with Gold market price

I have to mention that the most important factor is a safe jurisdictions because, in time of crisis, governments will impose Gold holding restrictions. Some governments have even previously confiscated Gold from citizens, just check these history facts:

• In 1933, the U.S. issued Executive Order 6102 requiring everyone living the U.S. to turn in gold coins, bullion and certificates.
• During World War II, the British Government ordered all citizens to sell their gold to the treasury.
• In Australia, Part IV of the Banking Act 1959 allowed for the government to seize private citizen’s gold for fiat currency. It has since been repealed.
• In Germany, as of the 1st of January of 2020, the limit to buy gold anonymously dropped from €10,000 to €2,000

You may be tempted to start owning Gold ETF with names like Invesco, Xetra, Gold Ishares Physical Gold, SPDR Gold Trust GLD with a low commission of 0.15% or 0.2% because these are big names on markets, but I don’t recommend them, as these ETFs are actually an obligation, or a debt note against a commodity.

Instead of having shares in a fund that directly owns the asset, such as gold, you essentially have a contract with a 3rd party Bank that guarantees your exposure to the asset. Generally, this should be a NO WAY TO INVEST IN GOLD because it would expose you to unnecessary counterparty or issuer risk.

We prefer to pay the doubled commissions to hold ETFs which own the physical bars of Gold and after a long time of research, I found that the only options are ZKB GOLD ETF and UBS GOLD ETF from Switzerland.

Just read the fund prospects below:

ZKB

The total expense ratio amounts to 0.40% p.a.. The ETF replicates the performance of the underlying index with a collateralised debt obligation which is backed by physical holdings of the precious metal. The ZKB Gold ETF A (CHF) is a very large ETF with 3,225m GBP assets under management. The ETF is older than 5 years and is domiciled in Switzerland.

UBS

The UBS ETF (CH) Gold (USD) A-dis invests in gold.

The total expense ratio is 0.23% pa ​​Index performance is tracked by a bearer bond backed by physical precious metal holdings. The UBS ETF (CH) Gold (USD) A-dis is a very large ETF with a fund volume of CHF 1,700 million. The ETF is more than 5 years old and set up in Switzerland.

Between ZKB and UBS, we prefer to invest with ZKB (Zürcher Kantonalbank) because is the largest cantonal bank and the fourth largest bank in Switzerland owned by the Canton of Zurich.

Thanks for reading, and please share your other options to own Gold on Facebook page or Comment section of the blog!

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Few days ago, most influential people in the world (managers of Big Companies, top academics, leaders in main stream media, central bankers) are gathering to find paths to solve the issues on humanity crisis. Between 22 May and 26 May, Davos hosted World Economic Forum. Davos is an "invitation only" event for the "elite”. Davos it’s in essence a festivity of the ruling class. Here, the new macroeconomic trend will be set for this world, trend that will last for decades from now.

I’m not a big fan of conspiracies, but the discussions at Davos will become policies next years and we can check few strong examples:

• “Zero interest rates policy”
• “Mass people migration”
• “The Abolition of Cash”
• “Launching Electronic Currencies”

What is it about at Davos this year?

One of the main topics discussed was population migration between continents. Today, the main threat for the European Economies is the population decline, while the main issue for African continent is overpopulation & famine. Migrants coming to Europe today are not attracted by opportunities, like Golds Rush few centuries ago in US, but are attracted by: free medical services, free food for social cases, exceptional living expenses, Social Houses.

Food crisis that is coming in the next year because of the Russia conflicts with Ukraine, will determine a Mass Migration from Africa to Europe. Food shortage and how to solve this was the main topic discussed this year at Davos.

There was a massive surge of migrants to Europe in 2015. But that was just the beginning of what’s coming the next years. What we’re talking about here is the migration of millions of people of different languages, different races, different religions, different cultures, and different modes of living. Such a migration can only destroy the European culture and you can check the history back of what happened 1600 years ago in the Roman Empire, considering the migration of Germanic tribes.

A snapshot of food prices today, price are at all time high

I don’t want to beat the horses to much with people migration because other topics are also interesting, like MMT (Modern Monetary Theories). MMT means unlimited creation of paper cash to finance what governments want. This new modern economic theory must be implemented because Governments are bankrupted. Just check the US, UK, France, Spain balance sheets and debt to GDP ratio to understand how things are working now.

The Elite State (Davos participants) prefer to finance governments bail-out via inflation instead of imposing new taxes (it was the stock heaven in the last years).

For this reason, inflation is surging all around the Globe but they can hide this very well behind the conflict between Russia & Ukraine. Our countries economics problems are more profound than we think they are!

How to hedge against inflation?

Our options are:

• Carbon Emissions Contracts
• Precious Metals (good option right now)
• Grains (too late)
• REIT Stock’s
• Energy Stocks (too late)
• Other commodities like: Coffee, Cocoa, Sugar, Uranium

These days we find some options for stocks that are not in the sectors mentioned above and we want to bring you some examples here:

• <DQ> DAQO NEW ENERGY CORP: Main producer of polysilicon to photovoltaic product manufactures in China. They have large clients in Europe, they also will open new factory in Mongolia, and the stock is extremely undervalued. 9 analysts revised their recommendations regarding this stock last month to upside.
• <FSZ> Fiera Capital Corporation: The main investment Company in Canada that grow their AUM through acquisitions and offer 9% dividend yield.
• <NRIM> Northrim BanCorp is the main bank in Alaska; we choose it because they have: low competition, 0 debts and Alaska will grow very much with the current Oil price.

Germany decision to stop Oil & Gas imports until the end of 2022 was in our opinion the main news at Davos and a BIG HIT to Russia. If Russia will not stop their “special operation” soon, we see this country evolving like the Nord Korea. India engagement to migrate on green energy is also a real big news that put a lot of pressure on China to change their policy also. India will change side to US-UK-EU alliance next years.

Job Market Evolution in years to come and how technology will change workers’ habits was also a good subject to meditate for the illuminated minds. Today, workers need to be more open to technologies, also work from home will be adopted by large companies. The main threat of productivity is the ability of workers to be self-organized, and discussions at Davos, was oriented on how to grow productivity in these new paradigm launched by COVID 19 disease.

Things are not going well and this was in agreement with all of the Davos participants, just to remind you some these week headlines:

• UBS have cut their 2022 GDP forecast for China to 3% y/y, from 4.2%. Reminder, the official forecast out of China is for around 5.5%
• JP Morgan downgrade China economic growth forecast, again. Project large contraction from -1.5% to -5.4%.
• ECB President Lagarde has indicated July is likely lift off for rate hike
• Fed's George says while inflation is clearly decelerating it could jump again

“With dedication to your freedom TopfxInvest”

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• All participant voted for 50 basis point hike
• 50 basis point increase is likely appropriate to the next couple of meetings
• concerned about the risks from higher income commodity prices
• Inflation remained elevated, reflecting continued supply and demand imbalances, higher energy prices, and broader price pressures. Inflation risk being skewed to the upside
• Restrictive stance on monetary policy may well become appropriate
• Fed should move expeditiously to neutral
• China lockdowns and Ukraine increased risks. New inflation pressures received from China as well as the Ukraine war, and were likely to weigh on economic activity
• Several thought the potential for unanticipated effects in the financial markets from the run off of the balance sheet
• Many expect tight labor market and wage pressures to continue for some time
• Members judged that the implications of the war for the U.S. economy were highly uncertain
• Higher wages and input prices were being passed on to consumers. Of course that will always happen
• COVID-related lockdowns in China were likely to exacerbate supply chain disruptions
• Although overall economic activity had edged down in the first quarter, household spending and business fixed investment had remained strong
• Job gains had been robust in recent months, and the unemployment rate had declined substantially.
• Should assess the risk the economy later this year after the rate hikes

You can read all from FED website: May FOMC Meeting 2022

Stocks Are up with 1%, because members of FOMC avoid risks of recessionary environment

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The wall street Journal announced  yesterday that Germany will drop opposition to russian oil embargo https://www.wsj.com/articles/germany-drops-opposition-to-russian-oil-embargo-11651155915?mod=Searchresults_pos1&page=1

That will have a huge effect on oil prices.Oil will surge if the ban will be effective this year.After the news oil climbed from 95 to 105.

Would be interesting if the Russian refinery (Rosneft) will process oil from Arabia. The Germany Government threatened Rosneft with sanctions if it did not process oil from other sources.

"Should Rosneft refuse to process non-Russian oil imports, Germany could put the refinery under state management under laws protecting strategic assets," (German ministry's).

German economy min on yesterday brief: 

"Higher inflation and slower growth is the price to support Ukraine"

• Confirms reports of 2.2% GDP growth forecast this year and 2.5% in 2023 without embargo
• Expects 6.1% inflation in 2022 and 2.8% in 2023

How much economic disruption are Europeans ready to tolerate for Ukrainian people ?

Euro is already at lowest levels against the US dollar 

The EU expects to remain dependent on imports of Russian gas for years (two three years at least). Russia’s move to halt gas flows to Poland followed Berlin’s decision to supply Ukraine with air-defense weaponry.  Russia will cut off Germany’s gas supplies if Berlin continues to ship arms. If supplies of gas were to be cut off tomorrow, Western European economies including Germany and Italy would face a severe energy deficit and a -2% on GDP. The economic effects would be catastrophic.

A sudden stop in the flows of Russian gas would mean industrial shut-downs and chains supply disruption because of economic shutdown. Southern European governments would demand more mutual EU debt issuance to relieve the economic pain. This is exactly what Germany has spent years trying to avoid. So, expect Berlin to do everything it can to keep Russia’s gas flowing in the near term, including dragging its feet over arms shipments to Ukraine, and paying for its gas in rubles, if that is what Moscow demands. Longer terms, Eu cut-off  russian gas, will be able to colapse & disintegrate Russia. War is already lost by Russian army, because you can't subjugate a free people and a country of the Ukraine dimensions with just 250K soldiers. When blitzkrieg is lost by Russia actually russian army lost the war.

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After high Inflation in US and Europe, the Covid-19 pandemic outbreak, a new event like war between two major countries affected the markets. War between Ukraine and Russia pushed this morning Gold over 2000$, Oil to 124$, Soybeans 1686$ and Corn to 775$. During war times precious metals, Oil and Grains perform well instead of risk assets like stocks.

High level of sanctions from the Western Economies will destroy the Russian economy in the medium term. The Putin regime will fall in the near future because you can't win a war completely isolated from western world and you can't govern with terror and mass-media censorship.

According to the last Russian laws, you can get 15 years in jail if you transmit information from the battlefield that is not what the regime wants. All social media are closed, also internet websites like BBC, CNN, The Guardian etc. If the Putin regime it's not quickly removed, the Russian people will live like in the North Korea.

Also, some important brands like Toyota, Ford, BMW, Mercedes, VW, Oracle, SAP, Mazda, Nike, PayPal, Apple, IBM, DELL, Mitsubishi have closed the doors to the Putin regime. The Russian currency is moving down by over 30%, and the Moscow stock market is closed for three days in a row.

With the US & EU already facing the highest inflation in over four decades, triggered by the Covid lockdowns and restrictions, and the February CPI release this week anticipated to show an escalation during the previous month, the real possibility of an economic recession is even larger.

Therefore, the Federal Reserve's upcoming policy meeting on Mar. 15-16, will start a new interest rate hike cycle and it's not advisable to be exposed on the growth stocks. We still own high dividend stocks in the energy and finance sectors and also, we are keeping our Gold & Silver positions. We anticipate further weaknesses in stocks this month.

The United States and European allies are exploring banning imports of Russian oil, Blinken said on Sunday, and the White House coordinated with key Congressional committees moving forward with their own ban.

"A boycott would put enormous pressure on oil and gas supply that has already felt the impact of increasing demand. Prices are likely to rise in the short term, with a move toward $150 a barrel not out of the question Such a move will put further pressure on global economies, pushing inflation higher, leaving central banks debating how quickly rate hikes should be implemented." according to some analysts from CMC Markets.

"The war has clearly increased the risk of a stagflation scenario for the euro zone, where you will have a stagnating economy and much higher inflation on the back of high energy prices," said Carsten Brzeski, global head of macro at ING.

We stand with the Ukrainian people that fight for their freedom and we want to help mothers with children that are refugees. Right now, we are facing a real drama on the Ukrainian border as the refugee and their children are staying over three nights on -15°C without food and water.

It's estimated that there will be over 10 million refugees this year, if the conflict does not stop soon.

If you want to help refugees, you can donate on these links:

https://www.unicef.org.uk/donate/donate-now-to-protect-children-in-ukraine/ 

https://donate.unrefugees.org.uk/ukraine-emergency/~my-donation

https://donate.redcross.org.uk/appeal/ukraine-crisis-appeal

https://www.icrc.org/en/where-we-work/europe-central-asia/ukraine

https://www.savethechildren.org.uk/

https://donate.careinternational.org.uk/page/100263/donate/1?ea.tracking.id=e75_orgsocial

https://www.peopleinneed.net/

https://msf.org.uk/

You can help Ukraine Army here:

https://www.portmone.com.ua/r3/uk/terminal/index/index/id/118103/

Слава Україні! (Slava Ukraini!)

Glory to Ukraine!

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SPX gave back the gains at the end of the day, because investors lost conviction that an early rally had legs. Risk-On sentiment didn't last after China decreased rates. Fears of inflation and higher interest rates in accordance with Geo-Political conflict between Ukraine & Russia have sent markets in red at end of the session.

Concern that the Federal Reserve will aggressively move to raise rates this year is a much more powerful catalyst than Chinese bank intervention and stocks Earnings. Investors have been concerned about rising rates because they raise borrowing costs and could dent global growth prospects and douse the earnings outlook for companies.

Analysts at ING said geopolitical risks, notably the possibility of Russia invading Ukraine, could continue to add to pressure on rising rates concerns.

Gold & Silver touched new highs lifted by worries surrounding inflation and Russia-Ukraine tensions. Gold 1,842 & Silver 24.63 gains were unexpected in the short term when bonds are up and Interest rates are expected to grow but geopolitical context is also an important catalyst.

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Yesterday markets were down with over 2% because disappointing Earning Results from banks like JPMorgan & Citi Bank. We are still waiting results of other big banks like Goldman Sachs, Bank of America. Morgan Stanley, to see if the lower trend will continue this week. The key driver to the current action in the stock market remains the spike in bond yields and announced Increased Rates. This Year stocks will be dealing with the highest inflation rate since the late 1970s, excessively high valuations, and an aggressive policy change by the Fed. 

2022 it's a year of challenge for stocks because we have to deal with:

• Lower Profit margin
• To high valuations
• Less liquidity in the economy
• Higher inflation
• Weaker economic growth
• Weak consumer confidence due to inflation
• Flattening yield curve
• Lower earnings growth
• Weaker economic data than 2021
• Tighter monetary policy
• Reduced consumption

Technically, Stocks broke below yesterday Trend Support Line with momentum and also Vix is UP. Tech Stock was affected badly losing over 3,3% 

Stocks still have room to move lower from here. We have recommended to buy Agricultural commodities in November and Soybean it's up with 6%.

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The news about higher prices of food abounds in online stream media. Agricultural prices will go higher in 2022 and will have a significant impact on CPI. The main reason of higher agricultural prices in 2022 are Shortage of Fertilizers. Fertilizers prices have grown up this year because of the higher prices of gas and transportation disruptions.

Crops benefit more from fertilizer treatments in the early phases of the planting season. Delayed or missed application during the cycle will almost certainly result in lower yields, which tightens the food supply and drives the prices up.

Transportation disruptions because of Covid19 outbreak has affected also delivery of parts for agricultural machinery. Many farmers acquired some agricultural machinery components from over 1000 km distance. Farmers from Ukraine – the main corn producer in Europe – bought agricultural machinery parts from Austria or Germany with considerable time delays (over three months). Many farmers are purchasing parts in advance for safekeeping.

U.S. farmers appear pessimistic. Agricultural producer sentiment has started to decline in recent months. The sentiment for future conditions is now nearly as low as it was in the peak economic closure of the 2020 pandemic. Farmers have expressed concern over high input costs – i.e., fertilizer prices – weakening their operating margins.

We play this trade idea to buy Agricultural Funds like:

• Invesco DB Agriculture Fund (DBA)
• Elements Linked to the Rogers International Commodity Index — Agriculture Total Return ETN (RJA)
• Teucrium Corn Fund (CORN)

For European traders, we have limited opportunities via Lyxor Commodities Refinitiv / CoreCommodity CRB EX-Energy TR UCITS ETF – Acc (CRN). Lyxor is a fund with over 56% exposure on agricultural products, and also precious metals (11.78%) and commodities stocks (11.35%).

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Do we have the opportunity to buy Palladium and Platinum right now, since the price dropped over 22% from all time high?

Prices are very attractive if we look on the charts below, but Fundamental Analysis tells another story.

• Palladium is used primarily as an emissions purifier for gasoline engines cars
• Platinum is used in the same way for diesel cars    
• Auto sector is continuing facing challenges due to micro-chip shortage
• Electric cars & hybrid technology are on the wave

We personally, don not like to take trades without a fundamental catalyst or in opposition to Fundamental Outlook. From a technical point of view, we have interest in this trade but just for a very short time (a few days trade duration).

It's wise to wait a recovery in car sales and, after that, just take this trade.

What is your opinion regarding rebounding in Platinum or Palladium, or it is only a fake move?!

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• We still remain slightly supportive in the near-term as we expect monetary and fiscal policy to remain highly accommodative but our conviction levels are simply pinned to our expectation that ETF outflows do not continue and we have some moderate inflows by the end of the year.
• With positive economic readings and in particular, positive jobs data market participants appear to be focused on the prospect of an earlier than anticipated interest rate hike. While real rates are still expected to be negative, any expectation that this could turn positive faster would really dampen investment flows.
• Our base case scenario is for gold prices to average $1,750 on average in 2022 as investment flows drop further.
• In the upside price scenario (which is the downside economic scenario), we forecast prices rising to $2,100/oz whereas the downside risk to prices (on the upside economic scenario) is limited and prices could fall to $1,600/oz.

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Oil producers have shut-in 95.65% of US Gulf of Mexico crude output totalling 1.74mln bpd and 93.75% of natgas production, while the Colonial Pipeline announced it will temporarily shut fuel lines from Houston, Texas to Greensboro, North Carolina and Marathon Petroleum's Garyville, Louisiana refinery (556k bpd) was also shut down over the weekend. US President Biden said Hurricane Ida is life threatening with the devastation likely to be immense and beyond the coasts, while he added they are planning for the worst from the hurricane and that it would take weeks for some places to restore power following the hurricane. Furthermore, President Biden later declared a major disaster for Louisiana and Entergy announced that all of New Orleans had lost power due to catastrophic transmission damage from Hurricane Ida.

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