War Enters a New and More Dangerous Phase
We are down to just two places for investors to hide beyond oil and cash: a barbell of clean transition energy and coal.
Key Takeaways
Markets React to Perceived Fed Hawkishness: Fed Chairman Powell said little that was really new yesterday, but the bond market did not like the boosted GDP and inflation projections, the fact that the central bank seems more consumed with inflation concern than labor market weakness, or the fact that policy tightenings are being priced in over in Europe. No relief from market interest rates represents an added impediment for equities, and the rise in real yields and U.S. dollar firmness continue to undercut gold and silver prices.
Almost No Places to Shelter from the Downturn: There are few places to hide. Not in stocks — every sector closed in the red. Not in Energy stocks, even with the spike in crude prices. Not in the most defensive sectors, like Heath Care and Consumer Staples, which actually underperformed the market. Not in gold, silver, Bitcoin, or industrial metals, and that includes once-mighty copper. Even the S&P 500 Defense subsector fell by -0.3% yesterday and has been clocked for losses in seven of the past eight sessions. What does the Iran war have to do with U.S. Health Care Service stocks? Yet this group sagged by more than -1.0% for the second day in a row and is off by nearly -10% in less than two weeks.
Financial Sector Showing Signs of Stress: For those who love to talk about the resilience of the overall equity market, dig a little deeper and you will see that the regional banks — big lenders for private debt and equity funds — are back in a bear market (down -20% from the early February highs). Consumer Finance stocks are off by -26% (back to where they were last June) and yet nobody from the media asked Jay Powell at yesterday’s press conference how that fits into the “economy is solid” narrative. All the more with General Mills and Macy’s having just issued some soggy guidance over the consumer outlook.
