Weekly Memorandum 5/23/2022
Stocks were down again last week, falling to new multi-month lows, which was in alignment with the bearish expectations we set forth in our Mercator Letter. It's worth noting, however, that the performance discrepancies between sectors is very wide - it's over 75% year-to-date between energy and consumer discretionary now. Overall, tech continues to drag the market lower, but we still see strength in sectors like energy, utilities, and dry bulk shipping.
Market sentiment has reached fairly elevated levels of bearishness, but this doesn't necessary mean a low is imminent. There are still those eager to buy the dip, and at some point, they will be right, but it doesn't seem as though there's been capitulation just yet. A close above key resistance would suggest otherwise.
Interest rates fell somewhat as we are finally seeing a flight-to-safety trade work. The dollar saw some profit taking but remains in a strong bull trend. Crude Oil continues to consolidate near the highs, which is bullish overall. Precious metals are trying to stage a relief rally, while cryptocurrencies are consolidating their losses, which is bearish.
A new Mercator Letter was published this past weekend, where we updated our macroeconomic and equity market outlook.