Market Update

Russia is one of the world’s largest producers of many of the commodities necessary for modern society. Inflation was already on the rise, but since Russia’s invasion of Ukraine, the price of gasoline has soared. That’s because Russia is the second-largest crude oil exporter globally, only behind Saudi Arabia. Russia also happens to be the world’s largest exporter of natural gas, with most of that going to Europe through pipelines. Russia’s exports of natural gas are almost triple U.S. exports of natural gas. When it comes to agriculture, Russia is a top supplier of the world’s fertilizer; its wheat is exported globally; and it is the world’s second-biggest shipper of sunflower oil. In addition, Russia is a key supplier of industrial metals. China, Europe, and the U.S. are the largest buyers of Russian nickel—a critical metal for electric car batteries. The ripple effects are felt at the gas station and the grocery store as well as in unexpected ways – for example, Tesla has raised its car prices twice in just the last few weeks because of soaring nickel prices.

The big picture:

We entered a new Cyclical Bear on March 4, 2022, based on our reading of one of our Bull-Bear Indicators for U.S. Equities, represented by the S&P 500 Index and comparing rolling one-year time frames.   International equities, represented by the FTSE All-World Ex-US Equity Index., entered a Cyclical Bear status on February 25, 2022. And last year, the Bond Market, as measured by the Barclays U.S. Aggregate Float Adjusted Bond Index, entered a Cyclical Bear market status on October 1, 2021.

Shorter term, U.S. Equities, International Equities, and Real Estate, as measured by the MSCI US REIT Index, all continue to show some improvement from their recent sharp declines.

Commodities: Resources and Materials, as measured by the Dow Jones US Basic Materials Index, have remained strong. Gold and Energy continue to grow in strength. Last week, Oil resumed its upward momentum, retracing most of the last two week’s decline. Brent crude oil rallied 11.7% to $117.37 per barrel, while West Texas Intermediate crude surged 10.5% to $113.90. Precious metals also gained with Gold rising 1.3% to $1954.20 per ounce and Silver adding 2.1% to $25.61. The industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, finished the week down -0.9% to $4.70 per pound.

As usual, we continue to monitor the NYSE Bullish Percent chart and our other Point and Figure (X’s and O’S) charts daily to determine whether supply or demand is in control of the U.S. Equity Markets and our position on the playing field. On the NYSE Bullish Percent chart below, which measures stock participation to the upside or downside in the changing Supply or Demand picture, we see that currently we have moved back above the 50% line at the 52% level which is a positive sign. However, you can clearly see the overall decline that began in January of 2021 with lower lows (O’S) and lower highs (X’S) showing supply in control of U.S. Equity Markets. It has been a difficult time for investors and money managers.