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Weekly Memorandum 3/7/2022

Stocks ended near the lows of the week on Friday, after rallying to a new high following the low of February 24. Despite the shortages across many sectors of the economy, there is no shortage of fear in markets right now. This could put a cap on further downside in the immediate-term, but the big story is how the inflation trade is basically the only thing working at the moment. For years, tech grew to be such a large component of the overall market, that its decline is weighing on the indices. We can't rule out one final drop lower if we close below key support.

Another big story last week centered around grain markets, especially wheat and corn, which exploded to decade-plus highs. Ukraine is a major grain exporter and there are concerns of supply chain issues. Additionally, Russia is a major exporter of fertilizer. Brokers have had to hit the circuit breakers on these markets to prevent them from rising too quickly, but they continue to limit up.

Crude Oil was also a big winner and rallied to its highest level since September 2008. This continues to put pressure on inflationary data, but we did see bonds pop last week too, in what could be the first signs of a crack in the commodity rally, or it could be a flight to safety trade unfolding with respect to the equity pullback.

Not much to update on the crypto front, but the dollar rallied to its highest level since May 2020 in alignment with our expectations. Precious metals put in good weeks too, with gold closing at a multi-year high, and silver starting to close above resistance.

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