Simon Lack, Portfolio Manager

The other day a White House spokesman offered familiar criticism of oil companies for not reducing gasoline prices to match the recent drop in...

The other day a White House spokesman offered familiar criticism of oil companies for not reducing gasoline prices to match the recent drop in...

Earnings season for the pipeline sector kicks off Wednesday 20th with Kinder Morgan. Crude oil prices have slid over the past several weeks, reflecting increased fears of recession and China’s ongoing efforts to eliminate Covid through regional lockdowns. Sharp moves in oil affect energy sentiment and the consequent drop in midstream energy infrastructure reflects these global macro concerns.  Fundamentals continue to look very good to us.

Earnings season for the pipeline sector kicks off Wednesday 20th with Kinder Morgan. Crude oil prices have slid over the past several weeks, reflecting increased fears of recession and China’s ongoing efforts to eliminate Covid through regional lockdowns. Sharp moves in oil affect energy sentiment and the consequent drop in midstream energy infrastructure reflects these global macro concerns.  Fundamentals continue to look very good to us.

It’s an odd recession when the economy adds 372K jobs and the unemployment rate stays at 3.6%. We seem to be talking ourselves into one. Consumer expectations are the lowest in almost a decade. High prices for energy and food are the culprit. Few are seeing their incomes keep pace with 8% inflation, so real incomes have taken a significant hit this year.

The energy transition’s long overdue reassessment was already under way by the time Russian missiles began falling on Ukraine. Fear of stranded assets has been replaced by the sudden need for energy security.

Every investor is aware that the market’s been volatile recently. The VIX is high but converting it into typical daily moves isn’t intuitive. Several readers like the chart below, which shows what % of the last 100 trading days have seen the market move by more than 1% in either direction. It’s currently 55, so more than half of the past 100 trading days have seen such a move.

People may disagree on whether this Fed is hawkish or not, but reactionary is not a controversial adjective. They first demonstrated this in waiting eighteen months after the Covid vaccine and fifteen months after the last $1.9TN slug of fiscal uber-stimulus to roll back their monetary accommodation. Quantitative Easing (QE) is more aptly followed by Qualitative Tightening (QT*), since they regard the inverse of bond buying as letting holdings mature as opposed to auctioning their MBS holdings.