Your Weekly Blip 3/7/22

Your Weekly Blip 3/7/22

The Markets,
“Ride ‘em cowboy!” Last week the Dow posted a net loss of 1.3% on heavier trading volume. As events unfold in Ukraine, investors are taking dollars off the table and the old buy the dip mantra might become another casualty of the war. Over the weekend oil prices spiked to levels not seen in decades with WTI crude briefly hitting $130 per barrel before finishing the day at $120 per barrel up 4%. Today the Dow continued to deal with the uncertainty and today closed down 797 at 32,817 on higher trading volume. Gold hit the $2,000 per ounce mark while Bitcoin fell below $38,000. Expect more volatility going forward with downside potential should things get worse.
The Economy and Earnings
Disruption in energy and natural resources are a huge story as the war unfolds. Russian is the 5th largest steel producer in the world and Ukraine is the 13th largest. Russian is also a major exporter of aluminum, palladium and fertilizers while Ukraine exports tons of wheat and corn. The disruption in these markets is driving prices of steel, wheat, aluminum, copper etc. higher. For example, Brazil imports a significant amount or Russian fertilizer, and they fear if these imports are halted the Brazilian agriculture export business, which is a significant part of their economy, could suffer and spark further global food price inflation. Steel stocks in the US have been on the rise lately as have copper and aluminum producers due to the global supply chain starting to shift away from Russia while still trying to meet robust global demand.
Pioneering Russian investor and Putin critic Bill Browder was interviewed on Yahoo Finance last week and his prediction that we will see a “massive accelerated strategic diversification going on” as countries move away from all things Russia, (especially energy) was spot on. Already Germany has restarted efforts to build two stalled LNG import terminals while other nations like Italy look to move away from Russian oil and gas and rely instead on the US and the Middle East. This will spur investment in energy infrastructure around the globe and here in the US the Senate is now looking at legislation to restrict Russian oil imports and replace them with domestic sources. Look for continued disruption in supply chains for materials, energy and food. One interesting thing I have seen lately is that US utilities that have hydro power as a meaningful part of their base load are seeing more investor interest for their shares.
Items of Interest
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