Disclosure: The following represents my opinions only. I am long every stock mentioned in this post (Image credit to Ice Tea on Unsplash)
Recession, recession, recession. You can’t go a day without reading about it, and yet the charts on the Dow, Nasdaq, and S&P look pretty hopeful. The market is geared for one more quarter-point rate hike to come out of the FOMC meeting on May 3rd and after that, it’s up to the economic data that follows. With the SVB “event” highlighting the vulnerabilities of certain kinds of collateral (for one, long-dated paper issued at negative-to-near-zero rates) under a rapidly rising interest rate environment, I think that the Fed knows that it needs to take a wait and see approach over the summer. I’m seeing a growing chorus of “3-4% inflation is the new 2%” in this new world of reorganizing/onshoring supply chains, so we’ll have to see if the Fed starts to adopt that stance. Markets aren’t cheap by historical standards, and yet the index charts look buoyant, so I’ll be keeping an eye on the March lows as a gauge of overall sentiment. Generally speaking, this still feels like a stock/sector picker’s market to me. I haven’t forgotten the Mark Mills presentation on the material realities of the energy transition that I linked to earlier this year, so metals and energy still figure prominently in what I’m most interested in theme-wise, along with my favourite “special sits” which I think can perform under most market conditions — as long as I can be patient with them.
Oil
No change here. Oils are cheap as a group and not many believe in the return of $100 oil. All projections suggest that H2 2023 will see a real tightening in the oil market and when I look at US rig data, I’m not fearing big U.S. shale growth in the meantime. OPEC’s recent production cut may suggest that they aren’t fearing U.S. shale either. Time will tell. My interest is in companies that are either event driven, or just really cheap, so I’m good with just about any oil tape.