We are now halfway through 2022 and it has been such a wild start of the year. The S&P 500 Index had its worst half a year since 1970 with losses of over 20%, the NASDAQ Composite fell more than 29% and the Bitcoin Reference Rate was down over 60%. This environment is nothing like what investors have seen in the last several years.
S&P 500 Index (SPX) 6-months
In Wednesday’s minutes, the Fed reassured its commitment to fighting high inflation despite the possibility of causing a recession. Further rate hikes are on the horizon. Supply chain concerns across the globe, plus war in Ukraine, and Covid continue to exacerbate volatility across markets.
Commodities from metals, to grains, to energy have lost more than 20% since posting record numbers just last month while crude oil has nearly erased its gains since the begging of the war in Ukraine. Prices of commodities are falling amid recession woes and therefore and an expected reduction in future demand. Even though this expectation is valid, supply remains tight in most of these markets due to structural underinvestment.
Crude Oil (CL) 6-month Daily Chart
On Thursday, crude oil rebounded above the $100 level after Russia ordered a halt on Kazakh, a key export terminal. Additionally, China is considering a $220 billion stimulus package that could potentially boost demand and ease recession concerns.
The lower prices in commodities will provide some relief to countries suffering from inflation and high food prices. Although with the US Dollar’s strength, many countries will continue to face high prices despite the drop in commodities.
The US Dollar continues to rally. With its strength, the possibility of the Euro and US Dollar reaching parity is near. The one-to-one level was last reached in 2002, yet the possibility of breaking that level looks likely as the trend is only accelerating.
Euro (EC) 6-month Daily Chart
