Oil spikes have historically negatively impacted economic outcomes. As the chart below shows, oil spikes typically are short-lived due to some exogenous geopolitical event. However, as was the case from 2003-2008, fundamental concerns, in this case, the fear of "peak oil," can lead to more extended periods of higher prices.
Volatility has plagued the markets so far in 2022 as steadfast inflation at almost 8% (a 40 year high), geopolitical strife from the Russia-Ukraine war, commodity price appreciation from agricultural products to industrial metals (because of inflationary pricing and geopolitical sanction hurting supply), and the Federal Reserve’s quantitative tightening agenda (to tame inflation) have been risk-on trades for markets, highlighting macroeconomic uncertainty and projecting a possible slowdown in GDP growth globally.
It is common knowledge that Russia is a major exporter of oil and natural gas. Just the fear of disruption of Russian energy exports has sent oil and natural gas markets into a tizzy. Russia, however, is not just a Slavic Saudi Arabia.
Greedy corporations are not causing inflation. Such is despite the claims of many of those on the political left that failed to understand the very basics of economic supply and demand.
Greedy corporations are not causing inflation. Such is despite the claims of many of those on the political left that failed to understand the very basics of economic supply and demand.
“Geopolitical Risk” could well be a reason for the Fed to slow-roll tightening monetary policy in March. With Russia invading Ukraine, such would not be the first time that the Fed used “geopolitical risk” to remain cautious on changes to monetary policy.
“Geopolitical Risk” could well be a reason for the Fed to slow-roll tightening monetary policy in March. With Russia invading Ukraine, such would not be the first time that the Fed used “geopolitical risk” to remain cautious on changes to monetary policy.
The discretionary sector struggled as did all growth and quality-oriented areas of the market in 2022. That was a classic re-set and a raging opportunity to add exposure.
The Institute for Supply Management’s monthly survey of purchasing managers came in below expectations for August, while the Bureau of Labor Statistics jobs report indicated that nonfarm payrolls expanded by only 142,000 jobs during the month (against expectations of 161,000 jobs).
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