Higher interest rates plus higher commodity prices (energy + metals + food) indicate that we are likely headed for a period of below-trend economic growth. Central banks seem intent on moving to a more neutral policy setting (against the backdrop of continued global supply shocks). The ECB may delay rate hikes, but is looking to accelerate the end of asset purchases. In the U.S., the CPI surged +0.8% month over month and 7.9% year over year in February. The core (ex food & energy) CPI rose… View More
Price Of Oil Most Stretched Since 1990 It’s no secret that the price of oil has skyrocketed over the last week and now stands at roughly 60% above its 200-day moving average. This is the most stretched it has been since the 1990 oil price shock when Iraq invaded Kuwait. During that period, the price of oil more than doubled in 3 months and stayed elevated for nearly six months. 1990 Saw A 20% Correction & A U.S. Recession During the 1990 oil shock, the S&P 500 corrected 20% and th… View More
Volatility Picks Up but Markets were higher last week as war breaks out in Ukraine U.S. equities were higher last week (S&P 500 +0.8%) thanks to big rallies on Thursday and Friday after big losses earlier in the week resulting from Russia’s invasion of Ukraine. The rally came as new sanctions on Russia were seen as less severe than expected. Oil prices briefly exceeded $100 per barrel. Best performers included REITs (+2.7%) and utilities (+2.0%); worst performers were consumer discretiona… View More
ANSWERS TO OUR FREQUENTLY ASKED CLIENT QUESTIONS ABOUT RUSSIA 1. With inflation running hot, the Fed likely to tighten, and Russia’s invasion of Ukraine leading to a spike in the price of oil, how worried are you about a recession in the U.S.? We think the chances of a recession are relatively low in the U.S. over the next 12 to 18 months. The labor market is tight, job openings are plentiful, monetary policy remains accommodative, and there remains a large reservoir of personal and corporat… View More
It’s always tempting to prognosticate how a headline event – geopolitical conflict, Fed action, etc. – may change the complexion of the market, but it’s been our experience that exogenous inputs do more to reinforce trends already in place rather than change the game. We’re not sure anyone has a real edge on Russia / Ukraine, and if they did, it doesn’t mean they’ll get the market’s reaction function correct as well. Prior to the acceleration of this conflict over recent weeks, t… View More