Week in Review: 26-30 December 2022 - Happy New Year

Summary:

    A relaxed week, without any big developments on the geopolitical or economic fronts. No rally in the stock markets (the so-called Santa Claus Rally) and low volume as expected for this time of the year.

    The next months will be key in revealing the terminal FED funds rate. Then, we may get the confirmation (or not) of a recession. The slowing down of the economy will be evident in individual company earnings and will drive valuations down. The re-opening of China and the end of the zero-COVID policy is to be confirmed. Energy markets will be dependent on supply (including OPEC decisions) and demand (recession in the West, vs the re-opening of China). The energy trade is not clear at all.

    Going into 2023, other instability sources include the low liquidity in the bond markets and cryptocurrency mayhem. Invest carefully, and stay tuned.

    Next week, in the US, there is the release of the labour market report, FOMC meeting minutes, ISM manufacturing and services PMI, foreign trade, factory orders, and Jolts Job Openings. Elsewhere, inflation rates for December will be released for Euro Area, Germany, France, Netherlands, Turkey, Switzerland, Philippines, and Indonesia. Finally, investors will pay attention to manufacturing PMIs from China, India, Spain, South Korea, Canada, Italy, and Switzerland.

Economic data source: Trading Economics

 

 

Mission Impossible

Video: “We are in a debt trap” - Nouriel Roubini on 10 ‘megathreats’ to our world and how to stop them

Channel: Channel 4 News

Mr Doom Brings Some Good Literature

Video: Marc 'Dr. Doom' Faber: "You should avoid FAANG and semiconductor stocks these days."

Channel: Prague Finance Institute

Digesting 2022 and Previewing 2023

Video: ‘We Want to Be More Cautious:’ Goldman Sachs CEO on 2023’s Global Financial Outlook | WSJ

Channel: Wall Street Journal

A Walk Around the Markets

 

OIL

 

Source: Trading Economics

 

WTI crude futures closed above $80 per barrel on Friday and gained nearly 8% in a year marked by extreme volatility as various supply risks vied with persistent demand concerns. The US oil benchmark reached a 14-year high of $130 per barrel in March as Russia invaded Ukraine, upending energy flows that have already been reeling from Covid-related disruptions. Oil prices then gave back most of those gains as major central banks aggressively raised interest rates to tame surging inflation, triggering fears of a global economic slowdown. China’s adherence to its strict zero-Covid policy also weighed on the demand outlook in the world’s top crude importer through most of the year. However, the Asian nation dismantled most restrictions in December following widespread protests a month prior, sparking hopes of a demand rebound. Investors are also watching for further actions from Russia after it banned oil exports to foreign buyers that adopt the G7 price cap.

Natural Gas

 

Sources: Trading Economics

US natural gas futures were trading below $4.5/MMBtu at the end of 2022, the lowest in over nine months, amid prospects of lower heating demand on forecasts for much warmer-than-normal temperatures this week and in early January. Also, concerns eased about supply disruptions including wells and pipes freezing due to extreme cold. At the same time, the Freeport LNG export plant in Texas, forced to go offline in June following a fire, again delayed the restart to the second half of January, pending regulatory approval. The benchmark is still up more than 30% in 2022 as Russia's invasion of Ukraine and the unprecedented economic sanctions have thrown the global energy market into chaos.

 

US Stock Markets

 

Source: Trading Economics

US stocks ended a dismal year on a sour note with the Dow closing 70 points down, while the S&P 500 and Nasdaq fell 0.3% and 0.1%, respectively, as investors continued to assess the outlook for growth and tighter monetary policy worldwide. The Dow fell 8.8% in 2022, while the S&P 500 and Nasdaq 100 plunged 19.5% and 33.3%, respectively, marking Wall Street’s worst annual performance since 2008. Governments and central banks grappled with stubbornly high inflation arising from years of loose monetary policy and the fallout from Russia’s war in Ukraine. The sharp declines in global equities worldwide wiped out nearly one-fifth of the capitalization of global stocks, preceding largely pessimistic expectations for next year as central banks signaled further aggressive monetary tightening to rein in unstable price growth, ultimately leading to job losses and downward earnings revisions. In December, the Dow lost 4.2%, the S&P 500 lost 5.9%, and the Nasdaq 100 dropped 9%.

 

Bitcoin

 

Source: Trading Economics

Bitcoin US Dollar traded at 16574 this Saturday December 31st, decreasing 2 or 0.01 percent since the previous trading session. Looking back, over the last four weeks, Bitcoin lost 2.09 percent. Over the last 12 months, its price fell by 65.28 percent.

 

 

Gold

 

Source: Trading Economics

 

Gold prices were at $1,815 an ounce in the end of December, rising nearly 9% in the fourth quarter to close a volatile year flat. Gold led a sharp rally for precious metals at the end of the first quarter, reaching a near-record high of $2,000 per ounce as Russia’s invasion of Ukraine triggered commodity prices to soar and led investors to pile on bullion investments for safety. Consequently, soaring inflation among major economies, including 42-year high inflation in the US and record-high price growth in the Eurozone, preceded an aggressive tightening of monetary policy by central banks worldwide. Higher borrowing costs, soaring bond yields, and a rally for the US dollar reduced the appeal to hold non-interest-bearing bullion investments, pressuring gold to a 30-month low of $1,615 at the end of Q3. Still, recession concerns prevalent towards the end of the year gave some respite for bullion investments, supporting gold to rebound above the $1,800 threshold.

 

 

Silver

 

Source: Trading Economics

Silver prices hovered above $24 per ounce to end a volatile 2022 3% above where it started, supported by increased demand for precious metals amid recession concerns and looming supply shortages. Geopolitical risks triggered by the Russian invasion of Ukraine ramped up demand for bullion investments, while Western sanctions threatened supply from major producer Russia and lifted prices to a year-peak of $26.4. Limiting the yearly gains, the rise in interest rates from major central banks to combat inflation drove investors out of bullion to interest-bearing securities, while the tight monetary setting reduced demand for silver as an industrial input for electrical conductors, tracking the mid-year decline for copper. Still, looming supply concerns drove silver to outperform gold and palladium in 2022. COMEX inventories fell 70% in the last 18 months to just over 1 million tonnes, and London Bullion Market Association stockpiles fell sharply amid outflows to India.