Metals: 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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Yesterday FED hiked rates by the expected 50 basis points to 4.50%, but surprised by hiking also the terminal rate to 5.1% at their last dot plot in September. They also raised the inflation forecast for the end of 2023 to 3.1% from 2.8% and the core PCE to 3.5% from 3.1%. They don’t see inflation moving toward the 2% target until 2025.That was extremely bearish for Stocks, S&P lost from +1,2% to -0.6% on market close, yesterday was an important sentiment change.

What to expect from this point?

U.S. stocks were higher last week, having rallied 15% from October lows. U.S. Treasury yields fell, causing the yield curve to invert by the most since the early 1980s. I don’t think stocks are fully pricing in the recession we see from the FED over tightening policy. The FED will eventually stop its rate hikes next year, but we’re not expecting large & successive rate cuts that the market is pricing in.

Economic activity is continuing to slow in the U.S. & Euro Zone, according to the flash Purchasing Managers’ Index for November.

EURO ZONE PMI

US PMI

In the U.S., services activity has been contracting for some time, but manufacturing also contracted last month for the first time. Readings for manufacturing are at the same levels with readings during recessions in 2009 & 1991, we’ve had a fifth month of factory activity decline in a row.

It’s evident that rate hikes from major central banks, especially FED it’s a major catalyst to lowering economic activity but the size of the damage will depend on how much it will hike in 2023. We expect that the FED will stop hiking at the beginning of 2023 but will not curb inflation to 2%. In the next year, we’ll register persistent above the target inflation and lower economic activities. Major spending shifts and production constraints are driving inflation higher. We don’t expect that the FED will start to lower rates next year.

Greater Volatility it’s our main expectation next year because production constraints triggered by the pandemic (China Lock-downs) and the war in Ukraine are pressuring the economy and inflation. It's a higher risk to own stocks and bonds investors need to have short time frames between market cycles.

It will be difficult to fight with inflation for FED because of the aging population and bad demographics in the US.

Why We are Positive on Gold?

Because Gold it’s the best way to preserve value and right now it’s started to climb higher from 1600 to 1800. Gold it’s the ultimate way to hedge against these complicated macroeconomic environments. Traditionally 40-60 stock/bonds portfolios allocation is not recommended because we have a direct correlation between stocks and bonds.

Economic consensus is for weaker growth, small recession (soft landing according to Powell) and ending rate hike cycle. How does this economic outlook influence Gold?

• Further weakening of the dollar as inflation recedes it’s positive for Gold
• Geopolitical conflicts are 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

Downside risks also exist for Gold via a soft landing scenario, where business confidence is restored and spending rebounds. Risk assets would likely benefit and bond yields remain high – a challenging environment for Gold.

Gold Stock Miners ETF (GDX) already bounced and offers leveraged exposure conservative investors could try our ETF with Gold backed (ZKB GOLD & UBS ETF GOLD). Read more in article Why to invest in Gold and how to store it from 26 July.

One of our best bet stock last month was IAUX i-80 Gold Corp with 35% upside because of incredible result from Ruby Hill Nevada Project.

Our worst performer was SHWZ Medicine Man Technologies with -5% but we are still positive about this company. 

To your future success!

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We think today that Fed and Mr. Powell will search sooner rather than later for a pivot point policy to change things because we already have a higher restrictive economic environment. We should remember that, when Fed suggested last time in 2018 that “future course of policy was predetermined on autopilot”, the stocks collapsed and Fed backtracked. Now they are trying right to introduce “data depending” on their speech, just check what they have said on Sept 30:

“Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target. For these reasons, we are committed to avoiding pulling back prematurely. Fed will proceed in a data-dependent manner.”

Fed will keep hiking until something will break up. Just check the Bank of England (BOE) intervention because of illiquidity on gilt markets, also the Bank of Japan which have announced their first intervention to support Yen against a stronger Dollar. These interventions calmed down the market but nothing is done to solve the major fundamental issues.

Just check the chart below for Pound ADR (Average Daily Range) of 500 pips. This is not a common sense movement.

But when will we see an inflection point for Fed?!

It’s all about the last Jobs Report which shows that is much stronger than expected, with a 263,000 monthly job gain while the Unemployment Rate had a major drop to 3.5% versus a consensus forecast of 3.7%.

Average Hourly Earnings is at the lowest point since December 2021.  Stock market Futures are decreasing and bond yields are rising in the wake of a stronger than expected NFP. Inflation expectations have been on the retreat, but Mr. Powell still needs a lower job report next month to start change the monetary policy.

If we get a hot CPI tomorrow, while considering an improving job report in November, it could mean that we can’t expect a 125-bps worth of Fed hiking starting now, until the end of the year, but a 150-bps hike on December 2022. This scenario will be very bearish for S&P with another minimum of 300 points down from here.

If we will see a lower Job Report in November and December, therefore we could expect a stronger S&P from here.

Which Sectors Are Still Performing Better than S&P and What Are Our Exposure Today?

I don’t want to dig much further on this article.

We like the Energy Sector and we still have some good stocks like: CWEN, PIF, SU, VLO, TGA. Energy sector is the only branch on green this year. I think it’s too late to take new positions on energy right now, and if we see good news about the war in Ukraine, we will close some of our positions. Clean energy solutions will not solve this crisis, but it will be a part of the longer-term solution for improving the energy independence.

We have a great exposure on precious metals Silver & Gold, meaning 30% from our Portfolio. I’m still optimistic about Gold and I recommend to buy it after Fed will start changing its policy. Gold will be the first instrument that will start to grow. Gold registers a minus 8 percent year to date, but outperformed S&P with over 15 percent. We bought Gold between 1700 and 1800 and we expect a target price of 2000-2200 in the next year.

We are very bullish on Uranium, Lithium and Silicon because of EV market catalyst. We bought CYDVF (Cypress Development Corp), SQM (Sociedad Química y Minera de Chile S.A.), and bought again DQ (Daqo Energy).

The Financial sector it’s also one of our bets and will outperform S&P 500 because of the Rate Hike. Financial is in red year to date but emergent markets will outperform the US financial sector. We acquired Banco do Brasil (BDORY) because of a strong balance sheet and a good perspective on growth.

We have few opportunities to follow in a bear market and for us it’s an option to be exposed with 30% on cash until things will change from the FED side, maybe in the end of the first quarter next year it will be good time to acquire risk assets. What is your opinion regarding Stocks? Looking forward to hear your opinions in the comment section below.

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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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We analyzed the last week's performance on each asset class and found that the most resilient category from year to date is Energy, REITs and precious metals (instead of the last rally down of Gold). It’s difficult to find a place to park the money 💵 in this economic and financial outlook. According to Warren Buffet, in a recession environment everyone loses, but some of the people have a small loss and others have high loss.

Even traditional safe heavens offered little protection in the first half of 2022:

• Bonds have historically grown when stocks have plunged, but Treasuries and municipals Bonds sold off in the first six months with -7%, S&P500 Corporate Bond Index is down 15%
• S&P500 is 19% down today, Nasdaq100 with 28% in red, Down Jones 14,5 % in red
• Crypto Markets Bitcoin & Ethereum have lost over 70% from high
• Commodities without energy-related doctor Copper have lost 23% and Cotton 17%
• Precious metals are best performers today with only 3,8 % loss
• Few REITs that have contracts related to interest rates also performed very well: VICI +8.5%, O -3.5%, UBA -0.8%
• Dollar outperformed marked DXY with +12%

So how did we get here?

We get here because of the high Inflation, rising interest Rates, record Energy Prices, war in Ukraine, Covid 19 pandemic and FED easy money printing in this decade. Everything seems to be a bubble.

How long will it last?

Risk off mode will persist this year and also at the beginning of 2023. History of bear markets from '49 tells us that we can stay in the red between three months and 39 months.

How much will the markets drop from Here?

S&P has fallen from 30% to 60% in 13 bear markets. We are reasonable to accept a minimum of 10% draw down from here, but because of amplitudes of the factors that generate this financial cataclysm, we must see a much more loss in Equities. We must understand the psychology of markets and individuals to know how to act.

We think we are before of the Panic stage of the markets right now (see first image). What is your opinion on this current stage? Will appreciate your opinion on the TopfxInvest Facebook Page.

Many analysts that we consulted seem to indicate that a peak of inflation will determine a bottom for stocks. We don’t think that is a true scenario because of the magnitude of the factors that start this bear market. I would be extra cautious before making any big bets on stocks and I’m a big fan right now of high dividend stocks that are resilient to interest rates hikes.

How to act right now, do we have a place to invest?

We prefer to consolidate the Gold & Silver positions, also we started selling Energy & Commodities Stocks that outperformed the market (like Daco Energy DQ, CNQ). We think that Gold will rise after the FED will finish with rate hikes and the Dollar will lose some peace of growth. We also studied the history chart of EUR/USD and when the Dollar is on Parity with Euro, will have some correction on the Dollar Index.

Chuck Berry inspired this article with “No Particular Place to Go”

An interesting topic for a future article will be: How to identify fundamentals of a market bottom or how to store Gold in efficient & safe ways?

Thanks for reading, and I’m waiting your feedback for our articles on our Facebook Page.

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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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As we started a new year 2022, we want to present you our conclusions on markets and an analysis of our managed portfolio. In this article, we will analyse four major assets: Stocks, Gold, Oil and Commodities.

After stellar gains registered in 2021, in 2022 markets are expected to grow at a moderate peace, due to the rising risks.

We are bullish on Gold and Silver, and we are also confident on a future increasing in agricultural commodities, as we also presented in our article: https://topfxinvest.com/blog/we-anticipate-the-food-crisis-in-2022

Now let’s take a look on some factors that can influence stock markets in 2022:

Bullish Factors:

• The domestic economy is growing
• Consumer spending overall is strong
• Employment is expanding, and the unemployment rate fell to 4.1% from 4.2%.
• Corporate earnings are growing by 27% (Apple it's $3 trillion company & Tesla deliveries grow by 87%)
• Covid-19 Pandemic new variant Omicron is decreases in death rates

Bearish Factors:

• Rising interest rates: FED official announced this week that they see this year three, instead of two interest rates increase
• Some stocks are extremely overvalued, like FTNT (over 100%: yesterday we closed our position on FTNT) or MRNA. Also, almost 100 stocks from S&P500 index are up over 50%, which is too much in our opinion. If US interest rate will hit 5%, stocks will go down badly, similar to the 1987 crisis.
• Continuing inflationary pressures because of transportations issues. We already discussed this topic in our article Shipping Congestions and higher prices will continue until ends of 2022 according to Morgan Stanley
• Global tensions between Russia and US on Ukraine / Kazakhstan, also China and US on Taiwan, which are possible to extend into some major conflicts.
• Covid-19 Omicron it's still here, and we cannot anticipate the implications of other virus mutations. If we have other lockdowns because of new pandemic outbreaks, stocks will be badly hit.

Other opinions regarding stocks:

JPMorgan Kolanovic says to buy the dip:

“Higher bond yields should not be disruptive for equities, but rather support our call for a growth to value rotation. […] We stay positive on equities and expect Omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll. As this wave fades, it will likely mark the end of the pandemic Omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity”.

On congested supply lines: “signs of supply constraints potentially passing their worst point”

BlackRock's largest fund asset has an optimistic view, but they raise concerns over China Covid19 policy: 

“The Fed has signalled three rate rises this year – more than we expected. Markets seem primed to equate higher rates as being negative for equities. We’ve seen this before and don’t agree. What really matters is that the Fed has kept signalling a low sum total of rate hikes, and that didn’t change last week. This historically muted response to inflation should keep real policy rates low, in our view, supporting equities.”

“And not all spikes in long term yields are the same. Last week’s jump in U.S. Treasury yields was about the Fed signalling a readiness to start shrinking its balance sheet. This could result in a return of the term premium that investors typically demand for the risk of holding long-term bonds. This is not necessarily negative for risk assets as it can reflect an investor preference for equities over government bonds.”

Regarding China slows growth rate: “The key question is how China’s zero-COVID policy will stand up against Omicron. The policy so far has proven effective and enjoyed popular support, but has left China with almost no natural immunity. We expect the country to maintain the policy – at least optically – in this politically important year. This raises the spectre of more restrictions on activity, from targeted measures that keep the economy humming (Shanghai) to full-scale lockdowns (Xi’an). As a result, we believe downside risks to China’s growth have risen, even as Beijing appears bent on achieving its growth target this year by loosening policy.”

We think it's reasonable for Gold to push a higher price to 2500 after a huge stimulus amount, but it will happen only after the FED finishes raising the interest rates. Oil will slow down only after the inflation will also slow down, probably in the second part of the year according to Citi Bank Forecast

We added to our portfolio some agricultural commodities and precious metals (Gold and Silver). and we sold some positions like: Tesla, Fortinet, Shopify, DocuSIgn, Disney, TradeDesk. In 2022 we plan to add more dividend stocks because we have a more neutral view on this year’s growth.

Further, I'm not a big fan of Crypto currencies. 40K for Bitcoin is a good price, but if it goes further under 30K, it's a good to buy and hold bet.

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We have taken a Gold & Silver Position two weeks ago, at 1.710, and respectively 22.4 because we consider that Gold & Silver are the best bet against inflation, to add it at a portfolio.

We placed our funds via ZSILUS & ZGLDUS from Switzerland (Cantobank) considering primarily the safety of the funds, but in the TIPRANKS platform we added AAAU ETF and SLV ETF, as the aforementioned funds were not available.

Why do we like Silver & Gold in the long run, from a Fundamental point of view?

• Gold & Silver are growing with fast peace because of the inflation pressure, CPI m/m numbers are much higher than expected: 9% versus 6%.
• More than 50% of Silver’s demand originates from the industrial use. Also, being a malleable metal, Silver is just as good as Gold for jewelry making. It is also a good conductor of electricity, and it is used extensively in the manufacture of electronic components.
• The transition to clean energy is expected to drive physical demand for Silver in the coming years, particularly for using it for connections in electric vehicles and for components in solar panels.
• Growing of the Fifth Generation (5G) Telecom Networks will also fuel the demand for Silver in the next years.
• Mining companies are worst performing in the last decade because of poor investments in this area.

Why don’t we like Silver & Gold in the long run, from a Fundamental point of view?

• Monthly manufacturing PMI, or Purchasing Managers’ Index figures from around the world are losing the momentum. We have some decline in summer (55.6 to 54) but it's still above 50, that means we are still in the expansion cycle. If trend will continue, it will drag lower especially on Silver, but Gold also. JP Morgan’s global PMI reading steadied at 54.1 in September, and we see some flat readings.
• Speculation since June, that the Federal Reserve will roll back its generous monthly stimulus of up to $120 billion that it has provided to the US economy since March 2020. That speculation weighed on Gold and Silver prices in the earlier months. On the stimulus end, the FED announced last week it would conclude its asset purchases in mid 2022 by tapering $15 billion each month from the program over the next eight months. FED Chair Jerome Powell also assured markets that the central bank will be “patient” in executing the first post-pandemic rate hike, which will likely take place at the end of next year. Possibility of a rate hike is dragging lower Gold, but in the long run Gold will continue to grow because of the huge amount of dollars printing in the pandemic outbreak. We have recommended buying Gold from 1.32 two years ago. Gold will enter in the second wave of growth if it breaks the Flag Formation next months.

From the Technical point of view, Gold & Silver is breaking resistance this week and it's still a good moment to add them to the portfolio, for the next years. We consider that Gold will reach the 2500$-3000$ area. Gold is breaking from a Flag Formation and Silver is bouncing from Range area. Please consider the charts below:

Gold Chart

Silver Chart

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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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