Material Moves.

Happy Friday folks! After a week of ups and downs causing the paradigm to shift even more, that’s a wrap – but obviously not before we share our long-term for the week and give our in-depth review of what we’re zeroing in on in this economy.

“The most dangerous poison is the feeling of achievement. The antidote is to every evening think what can be done better tomorrow.”
— Ingvar Kamprad, founder of IKEA

Market Talk

From Monday open to Friday close, the market moved a whopping 19bps lower…not quite the move you would expect given a flurry of material shifts in the macroeconomic space. That said, the S&P 500, did experience quite the 3%+ drawdown mid-week before appreciating 2% Friday. Pictured below is the S&P 500 which is still trading far below its 50 and 200-day moving averages (respectively blue and red), however, its current price channel is squeezing and an interesting thing to make note of is how the 50-day MA has acted as a key resistance level.
Moreover, as we’re heading into Q2 earnings season a potential widespread beat could serve as the catalyst the market needs to breakout upwards above the 50-day MA. A move like this would help close the gap between the 50 and 200-day MAs and put equities in a better position to start another long-term upwards trend. That said, betting on this earnings season going well is risky given the rocky start it had this first week with financial services companies missing across the board and how that can foreshadow what the rest of this earnings season may look like.
Long Term Pick: Invesco DB Commodity Index Tracking Fund ($DBC-NYSEarca)
It’s times like these where inflation is at 9.1% and broad macroeconomic moves are taking place (such as interest rate changes) where targeted investments into real assets will stand the test of time and yield the most positive out of a majority of asset classes. With that said, we believe there is an entrance opportunity to be had in Invesco’s DB Commodity Index Tracking Fund ($DBC-NYSE Arca). This ETF holds energy, metals and agricultural futures but has a bias (50%+) towards the energy sector. As oil is trading just below $100 per barrel right now and the energy market has multiple catalysts that support a bullish thesis on its price such as a strengthening relationship between OPEC+ and this new anti-western ‘BRIC’ currency union. With both China and Russia having exercised resource-nationalist policies, should they be able to strike a deal with OPEC, as well as some of the other oil-producing nations within their union such as Venezuela to cut off supply to the outside market, we could have a situation similar to that of Russia and the EU on a much larger scale. Additionally, in the months after the drop of 2008, this ETF rallied 65%+, while our current market still seems to be in downfall mode, should this earnings season poise it for a turnaround, this could be the beginning of its next bull run as it has already pulled back 18% from it’s YTD highs.
Chart of the Day – The effect of rate hikes on commodity markets…