Mike Fagan,
Editor
May 2, 2022
The NASDAQ just wrapped up its worst month in almost 14 years.
It has Morgan Stanley warning of a looming bear.
“The market has been so picked over at this point, it's not clear where the next rotation lies. In our experience, when that happens, it usually means the overall index is about to fall sharply with almost all stocks falling in unison,” wrote Mike Wilson, an equity strategist at the firm.
Economists at Deutsche Bank echoed a similar sentiment stating, “We will get a major recession,” citing inflation concerns and a tightening Fed.
And while most economists agree inflation has peaked or is close to peaking, the coming rate-hikes — which are poised to double to 50 basis points per — are coming at the worst possible time for equities with slowing GDP coupled with lackluster sales and earnings growth.
So… will we see the bear in the coming months?
Considering a bear market, by definition, is a scenario where prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment — it's a virtual lock that we will.
Just one month ago, the S&P 500 was peaking above 4,630. It closed April at 4,131, which represents a 10% drop already. The NASDAQ is closing in on official bear market territory even faster at around a 15% drop since the end of March.
So the larger question begs… are we headed for a recession?
While Deutsche Bank firmly believes we are — and they may be right as Q1 GDP just came in at -1.4% following 6.9% growth for Q4 — several other large banks, including UBS Global, believe the delicate dance of reining in the worst inflation in four decades via a tightening of the money supply will be just enough to get the economy back on-track despite the near-term detriment to equities.
The escalating war in Ukraine is by no means helping things, especially with Russia’s Foreign Minister Sergey Lavrov warning the West last week that staying involved in the conflict posed serious and real risks of World War III. The US and UK responded in-kind by sending additional advanced artillery weapons to Ukraine.
Nor are China’s woes as rising COVID numbers in Beijing are now posing serious lockdown concerns for the capital’s twenty-million-plus residents.
Such a move would only exacerbate the supply chain situation we’re experiencing here at home, which has not only handcuffed the US auto industry due to a lack of semiconductors but has also slowed the movement of goods from coast to coast.
So here we are… two-plus years into the pandemic and things remain at such a standstill transportation-wise that Walmart (NYSE: WMT) just announced it’s essentially doubling the pay being offered to first-year truckers from around $56K to upwards of $110K per year.
That should help jumpstart things to some small degree… yet the road ahead remains arduous with any number of unforeseen speedbumps still ahead.
So yeah, there are a number of things hampering the markets and the economy that few would have predicted at the start of 2020.
Sadly, it all began with the untimely passing of Kobe and his young daughter on that fateful day of 1/26/20 and basically went to shit from there!
All of this turmoil, really, should have each of us thinking about what’s truly important in our lives, which for me is family, friends, and paying extra close attention to my own physical and mental well-being so I can be the best version of myself for those closest to me.
It also has us looking for that elusive “bright spot” in the market as we attempt to navigate our way through the current malaise — whether it devolves to a bear, a full-blown recession, or pivots in the opposite direction.
One area we’ve been touting for months — well before Putin’s war and well ahead of the present sell-off — are the commodities and, in particular, the small-cap natural resource firms that are focused on metals vital to the green-energy revolution.
That includes precious metals like gold and silver… PGMs such as platinum and palladium… base metals including copper and zinc… battery metals such as lithium and cobalt… clean-energy metals like uranium… as well as the rare earths, which are so critical to our national security.
Even as our economy slows, the vast majority of these metals are trending upward as a result of rising demand at a time when fewer and fewer discoveries of consequence are being made.
We’ve given this megatrend a name — The Commodity Supercycle — and it’s that one “bright spot” I was referring to earlier.
Our predictions are proving dead-on accurate as metal prices continue to climb in the face of everything that’s going wrong in the world.
Check out our latest research here… which not only explains the commodity supercycle in detail but also has specific ideas to get you on the proper track in what’s shaping up to be a once-in-a-generation megatrend.
Mike Fagan
Editor, Resource Stock Digest